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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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Pie

Answer:

D. Providing value to customers

Explanation:

The marketing concept is the philosophy that firms should analyze the needs of their customers and then make decisions to satisfy those needs, better than the competition. Today most firms have adopted the marketing concept, but this has not always been the case.

Hope this was helpful, have a Wonderful Day!!

4 0
3 years ago
The Office of Economic Opportunity created controversy as it a. was one of the most effective programs of the Great Society b. s
adell [148]

Answer:

Option B                  

Explanation:

The Economic Development Department was the department responsible for overseeing much of the War on Welfare services that were developed as something of the binding referendum of Americas Leader Lyndon B. Johnson's Welfare state.

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7 0
3 years ago
EcoFabrics has budgeted overhead costs of $1,077,300. It has allocated overhead on a plantwide basis to its two products (wool a
sveta [45]

Answer:

(a) $1.8 per machine hour

(b) $390 per setup

Explanation:

Given that,

Overhead allocated to the cutting cost pool = $410,400

Overhead allocated to the design cost pool = $666,900

Total machine hours = 228,000

Total number of setups = 1,710

Under activity based costing,

Overhead rate for cutting:

= Overhead allocated to the cutting cost pool ÷ Machine Hours

= $410,400 ÷ 228,000

= $1.8 Per Machine Hour

Overhead rate for design:

= Overhead allocated to the design cost pool ÷ Number of Setup  s

= $666,900 ÷ 1,710

= $390 per set up

7 0
4 years ago
Janelle is very innovative and attentive to detail. As she starts her own company, she leads her employees and ensures that ever
OleMash [197]

Answer: Stage 3- Success stage.

Explanation:

Businesses are different in capacity and size for growth and are characterized by different organization structures, independence of action, and varied management styles.

The success stage is the stage at which companies seek whether to exploit their accomplishments and expand or rather enhance the stability of the company stable and profit. The main issue is to use the firm as an avenue for growth or means of support for the owners as they engage in complete or partial disengagement from the firm. During this stage, as the company grows, employers are more interested in the product and its growth.

5 0
3 years ago
Based on the corporate valuation model, Bernile Inc.’s value of operations is $750 million. Its balance sheet shows $50 million
NemiM [27]

Answer:

$500 million

Explanation:

Assets - Liabilities

= $750 - ($50+$100+$200+$100)

= $750 million - $450 million

=$300 million

Common stock = $40 million, Retained earnings = $160 miillon

Equity = $160 + $40 + $300 = $500 million

So, best estimate for the firm’s value of equity is $500 million.

3 0
3 years ago
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