Answer:
The order should be accepted as it will icnrease contribution by 2,700 dollars
Sales revenue 112,500
variable cost (106,800)
additional fixed cost <u> (3,000)</u>
contribution 2,700
Explanation:
We have to calculate the variable cost to compare against the offer sales price:
COGS
2,600,000 x 70% = 1,820,000
Operating expense
840,000 x 80% = 672,000
total variable 2,492,000
variable per unit:
2,492,000 / 350,000 = 7.12
we now calculate the contribution of the order and subtract the additional cost:
15,000 units x (7.50 - 7.12) -3,000 additional shipping
contribution 2,700
Answer:
less, more
Explanation:
Research suggests that a firm with greater multi market contact is <u>less</u> likely to initiate an attack, but <u>more</u> likely to respond aggressively when attacked.
<u>Multimarket contact occurs when firms compete with the same rivals in multiple markets. </u>
When firms compete with each other in more than one market, their competitive behavior may differ from that of single-market rivals. They do not respond as aggressive as they would have if contact or competition were to be in just one market.
Multimarket contact gives a firm more options to respond to actions or attacks by a rival in other markets other than in the market being challenged. <u>As a result, multimarket competitors may hesitate to attack in one market for fear of retaliation in other markets. </u>
<u>Multimarket competition may therefore reduce the competitive intensity among rivals, an effect known as mutual forbearance.
</u>
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The main disadvantage of the valuation method is that the terminal value tends to dominate the total value in many cases.
In a free cash flow valuation, the intrinsic value equals present value of its free cash flow and thus, the net cash flow is left over for distribution to stockholders and debt-holders in each period.
- So, the disadvantage of the free cash flow valuation method is that the terminal value tends to dominate the total value in many cases.
Hence, the Option B is correct.
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Answer:
expected return is 15.8%
portfolio beta is 94.5%
Explanation:
a. EXPECTED RETURN: to calculate the the expected return of, we simply multiply each of the stock percentage by its expected return and then sum it up. thus we have
0.2×0.16 + 0.3×0.14 + 0.15×0.2 + 0.25×0.12 + 0.1×0.24= 0.158
Multiply the result by 100% yields 15.8%
B. PORTFOLIO BETA: to calculate the portfolio beta, we simply multiply the weighted average of the stock percentage by the portfolio beta. thus we have;
0.2×1 + 0.3×0.85 + 0.15×1.2 + 0.25×0.6 + 0.1×1.6= 0.945
multiply the result by 100% yields 94.5%
Answer:
The Beta is 1
The required return increases to 13%
Explanation:
The formula for required return is given below:
Required Return = Risk-Free Rate of Return + β(Market Return – Risk-Free Rate of Return)
required return is 11%
risk-free rate of return=7%
Beta is unknown
market return-risk free rate of return is market risk premium is 4%
11%=7%+beta(4%)
11%-7%=beta*4%
4%=beta*4%
beta=4%/4%
beta=1
If the market risk premium increased to 6%,required return is calculated thus:
required return=7%+1(6%)
required return =13%
This implies that the riskier the stock, the higher the market risk premium, the higher the required return to investors.
