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vekshin1
3 years ago
11

The beta of an all equity firm is 2.3. If the firm changes its capital structure to 50% debt and 50% equity using 8% debt financ

ing, what will be the equity beta of the levered firm
Business
1 answer:
Citrus2011 [14]3 years ago
5 0

The beta of an all equity firm is 2.3. If the firm changes its capital structure to 50% debt and 50% equity using 8% debt financing, what will be the equity beta of the levered firm? The beta of debt is 0.2. (Assume no taxes.) Provide your answer with 2 digits after the comma.

Answer:

4.40

Explanation:

Equity beta, is a term in business or economics, which is.oftemr referred to as Levered beta, which measures the risk of a firm in respect to debt and equity in its capital structure to the volatility of the stock market.

Therefore, Formula for equity beta is giving as = βE = equity firm + (debt/equity)(equity firm - beta of debt)

Given that, equity firm = 2.3

Capital structure to debt = 50% = 0.5

Capital structure to equity = 50% = 0.5

Beta of debt = 0.2

βE = 2.3 + (0.5/0.5)(2.3 - 0.2) =

2.3 + (0.5/0.5)(2.3 - 02) =

= 2.3 + (1)(2.1)=

2.3 + 2.1= 4.40

Hence, the final is 4.40

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Kingbird Inc. owns equipment that cost $672,000 and has accumulated depreciation of $174,000. The expected future net cash flows
aev [14]

Answer:

Explanation:

In this scenario, we compare the values between book value and the fair value of equipment, the difference would be the loss on impairment of the asset

In mathematically,  

= Book value - fair value

where,

Book value = Equipment cost - accumulated depreciation

                   = $672,000 - $174,000

                   = $498,000

And, the fair value is $384,000

Now put these values to the above formula  

So, the value would equal to

= $498,000 - $384,00

= $114,000

Now the journal entry would be

Loss on impairment A/c Dr $114,000

      To Accumulated depreciation A/c $114,000

(Being the impairment loss is recorded)

4 0
3 years ago
Suppose the central bank implements expansionary monetary policy where the money supply increases. Which of the following will t
natka813 [3]

Answer:

D they both will increase

Explanation:

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1 year ago
During his annual performance review, Blake says to his supervisor, "So the two main ways that you want me to improve are to dou
Rom4ik [11]

Answer:

E. summarizing

Explanation:

This is an effective listening skill, as Blake asked his manager to improve what he said, and he articulated key ideas, and he took key points from people doubling his work to improve accuracy and become a team.              

The player being investigated  

so correct option is E. summarizing

6 0
2 years ago
Seven months ago, you purchased 580 shares of Mitchum Trading for $70.53 per share. The stock pays a quarterly dividend of $.39
Marina CMI [18]

Based on the number of shares you bought and the dividend per share, the total dividend income you received was $452.40.

<h3>How much dividend income was received?</h3>

The stock was held for 7 months and there are 2 quarters in a space of seven months so two dividends were received.

The amount received is:

= Number of share x Number of quarters x dividend per quarter

= 580 x 2 x 0.39

= $452.40

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3 0
1 year ago
What is the difference between a demand curve and a demand schedule?
svetlana [45]

Answer:

Demand schedule:

The Demand schedule refers to the tabular representation of the quantity demanded at the various price levels. By observing the demand schedule, we can conclude that as the price of the good increases then as a result the quantity demanded for that good falls. It represents various combination of price and quantity demanded.

Demand curve:

A demand curve refers to the graphical representation of the demand schedule which shows the relationship between the price of the commodity and the quantity demanded for that commodity. It is downward sloping curve which shows that there is an inverse relationship between the price of a good and the quantity demanded.

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2 years ago
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