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Lubov Fominskaja [6]
2 years ago
15

Ronald's Fast Food just paid their annual dividend of $1.05 a shareThe stock has a bela of 1.6. The return on the US Treasury bi

ll (risk-free rate ) is 8 percent the expected retum on the market is 15 percent What the cost of equity
Business
1 answer:
natali 33 [55]2 years ago
6 0

Answer:

19.2 %

Explanation:

Using the Capital Asset Pricing Model we can simply input the given information.

Formula

Cost of Equity = Rf + B * (Mr - Rf) where,

Rf = Risk free rate = T-Bill rate

B = Beta

Mr = Market return

so,

Cost of Equity = 8 + 1.6 * (15-8)

= 19.2 %

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On august 1, harvey company offered to pay $13,000 for equipment that was advertised as being sold for $19,000 by carrone compan
Fynjy0 [20]

Answer: Harvey company will record the equipment at $14,700 is its books.

We usually record equipment at the actual price at which it was bought. Even though Harry company was willing to pay only $13,000, it actually went ahead and paid $14,700 to purchase the equipment.

We don’t consider the retail price here, since Harvey company did not buy the equipment from the retail market.

In the advertisement, Carrey Company probably put a value of $19,000 (by considering the retail rate) to see the market response to buy the at that price. So, we don’t consider that either.

4 0
2 years ago
Axtara, an automobile manufacturer, has several factories in foreign countries. The management strongly believes in giving prece
Anastasy [175]

Answer:

The answer is: D) ethnocentric staffing model

Explanation:

Ethnocentric staffing model: involves hiring expatriates from the company´s home country to fill the most important positions in foreign subsidiaries. This usually happens within multinational corporations where a current employee working in the headquarter´s office gets transferred to a foreign subsidiary.

The main advantage of this approach is that expats should be better aligned with the interests and perspective of the home office. On the other hand, the main disadvantage is that the company loses local perspective and insights.  

4 0
2 years ago
"A new machine, with a 4-year life, has an initial cost of $1,200 and annual costs of $380. The equivalent annual cost of this m
Oksana_A [137]

Question

A new machine, with a 4-year life, has an initial cost of $1,200 and annual costs of $380. The equivalent annual cost of this machine is best described as the"

Assuming an interest rate of 10%

Note the interest rate was added by the tutor

Answer:

Equivalent Annual cost =  $758.56

Explanation:

The equivalent annual cost is the present value of cost of the new machine divided by the annuity factor.

PV of annuity cost = A× 1- (1+r)^(-n)/r

                          A- 380, r- 10% n- 4

PV of annual cost = 380 × (1- 1.1^(-4))/0.1=1,204.55

PV of total cost = 1,204.55 + 1,200 = 2,404.55

Equivalent annual cost = PV of cost /Annuity factor

Annuity factor =(1- 1.1^(-4))/0.1 = 3.1699

Equivalent Annual cost = 2,404.55 / 3.1699 = $758.5649

Equivalent Annual cost =  $758.56

8 0
3 years ago
Huprey Co. is the defendant in the following legal claims. For each of following claims, does Huprey (a) Record liability, (b) D
const2013 [10]

Answer:

a) Disclose in the notes

b) no Disclosure

c) Record a liability

Explanation:

There are three scenarios to be considered

1) It is reasonably possible that Huprey will lose a pending lawsuit. The loss cannot be estimable

First, premise is that Huprey Co. is facing a lawsuit and the possibility of a loss is most possible. If Huprey Co is able to recognize the amount of loss, then he would have been able to record a liability but the inability to estimate the loss means, the company can o<u>nly make appropriate disclosure in notes</u>

2)Huprey is being used for damages of $2 million. It is very unlikely (remote) that Huprey will lose the case.

This second premise is also a lawsuit on damages for $2 million, however, it is most reasonably acceptable that Huprey will win the lawsuit. As such there is no loss, that way there will be no disclosure in Huprey Co's books.

3.  Huprey can reasonably estimate that a pending lawsuit will result in damages of $1.25 million, it is probable that Huprey will lose the case.

The probability of losing a case means that there will be a loss to be recorded in the books and since the damages are already estimable to be $1.25 million. Huprey Co should record a liability

4 0
2 years ago
Cutler Petroleum, Inc., is trying to evaluate a generation project with the following cash flows:Year Cash Flow0 –$ 39,800,000 1
muminat

Answer:

The two IRRs are: - 76.49% and 36.79%

Explanation:

To simplify our "Hard work", let's denote the cash flow numbers in terms of '000 (To reduce the number of zeros).

IRR is that discount rate R, for which NPV = 0

NPV is the sum of discounted cash inflows and outflows. Therefore,

NPV ($'000) = - 39,800 + (63,800 / (1 + R) - [12,800 / (1 + R)2]

When NPV = 0 [If R is the IRR],

0 = - 39,800 + [(63,800 / (1 + R)] - [12,800 / (1 + R)2]

[12,800 / (1 + R)2] - [(63,800 / (1 + R)] + 39,800 = 0

To simplify further, let's put N = 1 + R. Also, let's divide both sides by 200 [Note: We're only doing arithmetical simplification to reduce the large numbers]]:

[64 / (N)2] - (319 / N) + 199 = 0

Multiplying all terms by (N2):

64 - 319N + 199 (N)2 = 0

that is,

199 (N)2 - 319N + 64 = 0

This is a quadratic equation with large coefficients. Solving quadratic equation is outside scope of this question (it belongs to Algebra), so I've used an Online Quadratic equation solver**, which returns following values of N:

N = 1.3679, and N = 0.2351

So:

1 + R = 1.3679, Or 1 + R = 0.2351

R = (1.3679 - 1) or R = (0.2351 - 1)

R = 0.3679 or R = - 0.7649

The two IRRs are: - 76.49% and 36.79%

4 0
3 years ago
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