1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
V125BC [204]
3 years ago
12

Trendsetters has a cost of equity of 14.6 percent. The market risk premium is 8.4 percent and the risk-free rate is 3.9 percent.

The company is acquiring a competitor, which will increase the company's beta to 1.4. What effect, if any, will the acquisition have on the firm's cost of equity capital? A. No effect Decrease of .62 percent B. Decrease of .84 percent C. Increase of 1.06 percent D. Increase of .13 percent
Business
1 answer:
Karolina [17]3 years ago
5 0

Answer:

The answer is option ( C.) Increase of 1.06 percent

Explanation:

Data provided in the question:

Cost of equity = 14.6%

Market risk premium = 8.4%

Risk-free rate = 3.9%

Company's beta = 1.4

Now,

Expected Return = Risk-free rate + ( Beta × Market risk premium )

= 3.9% + ( 1.4 × 8.4% )

= 3.9% + 11.76%

= 15.66%

Therefore,

The change in firm's cost of equity capital = 15.66% - 14.6%

= 1.06%

Hence,

The answer is option ( C.) Increase of 1.06 percent

You might be interested in
Assume that the level of capital flows between the U.S. and the country of Krendo is negligible (close to zero) and will continu
murzikaleks [220]

Answer:

Stronger

Explanation:

Given that inflation affects trade flows, as the higher price of commodities have negative impacts on exports rates. Thus, all things being equal, it is expected that high inflation should cause downward pressure on the exchanger rate of Krendo.

Hence, the inflation effect will be STRONGER than the interest rate effect in influencing the exchanger rate of Krendo against the U.S. dollar.

3 0
3 years ago
While designing a website, a(n) _____ allows you to identify the specific amount of space used on a particular page before it co
MrRa [10]
A wireframe would be useful in designing a web page since it would determine the specific amount of space to be allotted for the content to be placed. In addition, it serves as a schematic blueprint which functions as a layout for arranging the elements you want to put on the website.
3 0
3 years ago
Read 2 more answers
Carolina is the vice president of the environmental club at her high school. She is in charge of e-mailing members about upcomin
Basile [38]

Answer:

Downward communication

Explanation:

She is a higher up in the club, and conveys information to the rest of the club members, who don't have as much of an important position. Her job is to move information given to her to the rest of the members.

4 0
2 years ago
The overall learning goals for an educational program like the one you’re taking are called _______.
Gennadij [26K]
B. Objectives. Grades are a result of the course
6 0
3 years ago
Blossom Furniture Company started construction of a combination office and warehouse building for its own use at an estimated co
motikmotik

Answer:

weighted average rate: 11.14%

capitalize interest (avoidable interest) 421,270.24‬ dollars

Explanation:

construction related loan:

4,400,000 12%  =     528,000

general use:

3,080,000 10%  =    308,000

<u>2,200,000</u> 11%  =   <u>  242,000</u>

9,680,000  1,078,000

weighted-average rate: 1,078,000 / 9,680,000 = 0.111363636 = 11.14%

capitalize interest:

weighted-average amount of accumulated expenditures x w/a rate:

3,781,600 x 11.14% = 421,270.24‬

6 0
3 years ago
Other questions:
  • How do you view your account balance online?
    13·1 answer
  • Personal selling requires the ________ flow of communication between a buyer and a seller, often in a face-to-face encounter, de
    6·1 answer
  • A ________ is made up of a company, its suppliers, its distributors, and its customers who partner with each other to improve th
    9·2 answers
  • Swifty Corporation purchased a machine for $66000 on July 1, 2020. The company intends to depreciate it over 8 years using the d
    7·1 answer
  • Saleh, an accountant, is the sole shareholder of Turquoise Corporation, a C corporation. Turquoise is a personal service corpora
    11·1 answer
  • Magnus Industries has the following data:
    13·1 answer
  • You will be paying $10,300 a year in tuition expenses at the end of the next two years. Bonds currently yield 8%.
    7·1 answer
  • Identify five HRM criteria or components that can be used to measure organizational effectiveness or ineffectiveness. "Grievance
    9·1 answer
  • Creating a budget is about your wishes and hopes for what you want your income to be.
    9·1 answer
  • Delicious Catering completed the following selected transactions during May 2016: May 1: Prepaid rent for three months, $1,500 M
    5·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!