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Tamiku [17]
3 years ago
11

Honest Abe’s is a chain of furniture retail stores. Integral Designs is a furniture maker and a supplier to Honest Abe’s. Honest

Abe’s has a beta of 1.38 as compared to Integral Designs' beta of 1.12. Both firms carry no debt, i.e., are 100% equity financed. The risk-free rate of return is 3.5 percent and the market risk premium is 8 percent. What discount rate should Honest Abe's use if it considers a project that involves the manufacturing of furniture?
Business
1 answer:
valentinak56 [21]3 years ago
3 0

Answer:

The cost of capital according to CAPM method for Abe will be 12.46%

Their project will be evaluate with this rate.

Explanation:

It will use the CAPM to evaluate the project, as there is no debt, the WACC is not needed.

Ke= r_f + \beta (r_m-r_f)  

rf = risk free 0.035

rm = market rate  

premium market = (market rate - risk free) = 0.08

beta(non diversifiable risk) 1.12

Ke= 0.035 + 1.12 (0.08)

Ke 0.12460 = 12.46%

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Answer:

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Based upon Booked Orders and Sales Predictions, the expected finished goods requirements is 550 units over the planning period.
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Explanation:

Future Planned Production Orders = Expected goods requirement - Finished goods in inventory - Schedule production

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A high school student working part-time as a shelf stocker had a gross income of $6675 last year. If his federal tax rate was 10
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7 0
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Read 2 more answers
Moss County Bank agrees to lend the Oriole Company $560000 on January 1. Oriole Company signs a $560000, 6%, 9-month note. What
Vitek1552 [10]

Answer:

The Journal entry that Oriole Company will make to pay off the note and interest at maturity assuming that interest has been accrued to September 30 will be:

Dr Notes Payable 560,000

Dr Interest Payable 25,200

(560,000*6%*9/12)

Cr Cash 585,200

(560,000+25,200)

Explanation:

Based on the information given where Moss County Bank agrees to lend the Oriole Company $560000 on January 1 this means we have to Debit Note payable with 560,000 and since Oriole Company signs a $560000, 6%, 9-month this means we have to Debit Interest payable with 25,200 (560,000*6%*9/12) and Credit Cash with 585,200 (560,000+25,200).

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3 years ago
A researcher who is conducting observations to test her own hypothesis may see or pay more attention to behavior that tends to s
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Answer:

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Explanation:

A researcher who is conducting observations to test her own hypothesis may see or pay more attention to behavior that tends to support that hypothesis, so she must guard against observer bias

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knowledge of observation bias and how to guard against it will help her eliminate such error.

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