Answer:
A decision under uncertainty is a decisional problem.
Answer:
b. 5.0%
Explanation:
For this question, we use the Capital Asset Pricing model (CAPM) formula that is shown below:
Expected rate of return = Risk-free rate of return + Beta × (Market rate of return - Risk-free rate of return)
where,
The Market rate of return - Risk-free rate of return) is also known as the market risk premium
So, for stock A, the market risk premium is
10% = 5% + 1.0 × market risk premium
10 - 5% = 1.0 × market risk premium
5% ÷ 1.0 = market risk premium
So, the market risk premium is 5.0%
Answer:
c.12%
Explanation:
PVF of 12% for 6 years is 4.11
PVFof 11% for 6 years is 4.23
Present value of cash inflows, 12% = 7251*4.11
Present value of cash inflows, 12% = 29801.61
Present value of cash inflows, 11% = 7251*4.23
Present value of cash inflows, 11% = 30671.73
Internal rate of return = 11% + (30671.73 - 30000)/(30671.73-29801.61)
Internal rate of return = 11.7719969659%
Internal rate of return = 11.772%
Answer:
A. The total cost of the equipment.
Explanation:
Even if Jambon has not used the equipment in 2005 because it can only be used for the product that is to be developed in five years, Jambon still had to pay for the full cost of the equipment.
Because the equipment is laying idle, it is not depreciating. Therefore, the expense that Jambon is not incurring, is the depreciation expense associated with this equipment. This depreciation expense will only be seen in five years, when the product it was bought for is finally completed.
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