The approach suggest that a firm's cost of retained earnings can be estimated by adding a risk premium of 3% to 5% points to the before-tax interest rate on the firm's own long-term debt.
The bond-yield-plus-risk-premium approach does assumes that cost of equity is closely related to the firm's cost of debt.
- The premium approach does help to determine the value of an assetof a company's such as its traded equity.
However, the approach suggest that a firm's cost of retained earnings can be estimated by adding a risk premium of 3% to 5% points to the before-tax interest rate on the firm's own long-term debt.
Read more about the premium approach:
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Answer: $20000
Explanation:
Since $100,000 is paid for the contract which will provide the use of manufacturing equipment for 5 years, the payment that can be deducted for each of the 5 years will be an equal payment.
Therefore, the payment that X Corp. can deduct in 2018 will be:
= $100,000 / 5
= $20000
A security with a beta of 1 has a return last year of 8% when the market has a return of 12%.
Answer: Option A
<u>Explanation:</u>
In a market of the capitals, the return that a person will get from the security will depend upon the risk that has been associated with that security. The CAPM says that the return of the security that a person will get depend upon the beta of the security. Here beta is the measure with which we can measure the risk of the security. It is an absolutely correct measure of the security risk.
Answer:
The correct answer is "the company has not budgeted sufficient funds for training".
Situational constraints are the factors that affect the behavior and performance in a negative way by placing limitation on personal attributes and motivation. Example - lack of equipment, money, material, etc. In this scenario, employees and supervisors are eager to learn about using new technology but the only constraint that is likely to stand in a way meeting the objective is that the company has not budgeted sufficient funds for training.
Answer:
The statement is correct as well as true
Explanation:
Financial results or the performance, is the subjective measure or criteria of how well the business or the firm could use the assets from the initial mode of the business and create revenues.
In short, it is evaluated through earning or the loss which consequence from the financial affairs.
So, if the company is spending as well as retaining and developing the best people of their company, will often result in superior as well as healthy results, which means generate a good amount of revenue for the company by producing the goods.
