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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

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Andrea Apple opened Apple Photography, Inc. on January 1 of the current year. During January, the following transactions occurre
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Answer:

Apple Photography, Inc.

Based on this information, the balance in the cash account at the end of January would be:_____.

b) $12,115.

Explanation:

a) Cash Account

Common Stock   $13,600

Insurance              (2,200)

Service Revenue   5,800)

Rent                       (1,600)

Office equipment (3,200)

Utilities                     (285)

Balance                $12,115

b) Apple Photography, Inc had a balance in the cash account at the end of January of $12,115 which was the difference between the cash inflows and cash outflows during the month.  The inflows represented cash received by Apple Photography  from the owners and customers and the cash paid for running the business.

6 0
3 years ago
Swiss Furniture Company manufactures bookshelves and uses an activityminus−based costing system. The following information is pr
UkoKoshka [18]

Answer:

Cost of material handling and assembling per book shelf = $135.0811

Explanation:

Material Handling = $7,700 for 10,430 parts

Assembling = $10,600 for 10,430 parts

Packaging $2,640 for 1,490 bookshelves.

Each bookshelf consists 77 parts

We need to calculate material handling and assembling cost per book shelf.

Material handling cost per part = $7,700/10,430 = 0.738

Cost for 77 parts = 0.738 X 77 =$56.826

Assembling costs per part = $10,600/10,430 = $1.0163

Cost for 77 parts = $1.0163 X 77 = $78.2551

Cost of material handling and assembling per book shelf = $56.826 + $78.2551 = $135.0811

8 0
3 years ago
Aggregate demand is everything produced while simple demand is one good. which statement reflects simple demand?
liq [111]
B because it’s most average
8 0
3 years ago
In most transactions, the buyer is accepting the condition of the property at what point in time:_________
Dmitriy789 [7]

Answer:

b. At the signing of the contract

Explanation:

A contract can be defined as an agreement between two or more parties (group of people) which gives rise to a mutual legal obligation or enforceable by law.

Mutual assent is a legal term which represents an agreement by both parties to a contract. When two parties to a contract both have an understanding of the parameters, terms and conditions surrounding a contract, it ultimately implies that they are in agreement; this is generally referred to as mutual assent and it is at this point they (buyer and seller) sign the contract. Therefore, mutual assent connotes agreement, acceptance and consent to a contract by both parties.

<em>Hence, in most transactions, the buyer is accepting the condition of the property at the signing of the contract as an approval or consent to the terms and conditions. </em>

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3 years ago
congratulations! you were the 10th caller on the kmth morning show and you just won $4,000.00. after you calm down, you decide t
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The scenario states that the computation of the provided data is as follows:

The current value is $4000.

Rate = 7%

Monthly compound rate equals 10% times 12.

Duration = 2 x 12 = 84

So, using a financial calculator, we can estimate the value in the future.

FV = $4,884.56

Principal multiplied by one plus the interest rate divided by the number of periods, raised to the power of the number of periods, and that whole subtracted from the principal amount to yield the interest amount, is how monthly compounding is calculated.

To know more about Compound interest, click here:-

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6 0
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