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Simora [160]
3 years ago
13

The common stock of Detroit Engines has a beta of 1.34 and a standard deviation of 11.4 percent. The market rate of return is 11

.5 percent and the risk-free rate is 4 percent. What is the firm's cost of equity?
A. 10.05 percent
B. 12.98 percent
C. 14.05 percent
D. 15.50 percent
E. 15.67 percent
Business
1 answer:
stealth61 [152]3 years ago
6 0

Answer:

The firm's cost of equity is C. 14.05 percent

Explanation:

Hi, we need to use the following formula in order to find the cost of equity of this firm.

r(e)=rf+beta(rm-rf)

Where:

r(e) = Cost of equity

rf = risk free rate

rm = Market rate of return

Everything should look like this.

r(e)=0.04+1.34(0.115-0.04)=0.1405

So, this firm´s cost of equity is 14.05%

Best of luck

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Richard Beck has a life insurance policy which he has modified to include an accidental death benefit payable to his son and dau
Ksju [112]

Answer:

The correct answer is number (1): double indemnity provision.

Explanation:

A double indemnity provision is added in life insurance to double the amount the beneficiaries of the policyholder receive in front of his or her death in an accident. Double indemnity provision does not cover events in which the policyholder dies because of natural reasons or when those individuals had hazardous jobs. Premiums are higher with a double indemnity provision.

7 0
3 years ago
a table contains a column that tabulates the number of pages printed per da. the blank cells denote days on which pages were not
snow_tiger [21]

Answer:

B) =COUNT(A2:A101)

Explanation:

The COUNT function in excel with count the <em>contents</em> of all selected cells in the range (it counts what is <u>in the cells themselves</u>, not the number of cells). The range is expressed as starting cell, a colon, and the ending cell.

=COUNT(Starting cell#<u>:</u>Ending Cell)

4 0
3 years ago
Read 2 more answers
A stock has an expected return of 13.5 percent, its beta is 1.40, and the expected return on the market is 11.5 percent. What mu
uranmaximum [27]

Answer:

The risk free rate is 6.50%

Explanation:

The required rate of return is the minimum return that investors demand/expect on a stock based on the systematic risk of the stock as given by the beta. The expected or required rate of return on a stock can be calculated using the CAPM equation.

The equation is,

r = rRF + Beta * (rM - rRF)

Where,

  • rRF is the risk free rate
  • rM is the return on market

As we know the figures for r, Beta and rM, we will input these figures in the equation to calculate risk free rate.

Let risk free rate be x.

0.135 = x + 1.4 * (0.115 - x)

0.135 = x + 0.161 - 1.4x

0.135 - 0.161  =  x - 1.4x

-0.026  =  -0.4x

-0.026 / -0.4 = x

x =  0.065 or 6.50%

r = 0.1475 or 14.75%

6 0
3 years ago
As of December 31, 2018, Moss Company had total cash of $160,000, notes payable of $86,000, and common stock of $52,800. During
tatyana61 [14]

Given:

Total cash = $160,000

Notes payable = $86,000

Common stock = $52,800

Find:

Retained earnings as on December 31, 2018

Computation for retained earning:

According to Accounting Equation:

Assets = Liabilities + Stock holder equity

Total Cash = Notes payable + Common stock + Retained earning

$160,000 = $86,000 + $52,800 + Retained earning

$160,000 = $138,800 + Retained earning

Retained earning = $160,000 - $138,800

Retained earning = $21,200

6 0
3 years ago
This theory views shocks to tastes (workers' willingness to work, for example) and technology (productivity) as the major drivin
katrin2010 [14]

Answer:

The answer to this question is option C  Real Business Cycle theory

Explanation:

The Real business cycle theory is the theory that views hocks to tastes (workers' willingness to work, for example) and technology (productivity) as the major driving forces behind short-run fluctuations in the business cycle because these shocks lead to substantial short-run fluctuations in the natural rate of output.  

Real business cycle models state that macroeconomic fluctuations in the economy can be largely explained by technological shocks and changes in productivity. These changes in technological growth affect the decisions of firms on investment and workers (labour supply)

Hence the answer is option C  Real Business Cycle theory  

5 0
3 years ago
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