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gulaghasi [49]
4 years ago
7

The Dybvig Corporation’s common stock has a beta of 1.5. If the risk-free rate is 4.6 percent and the expected return on the mar

ket is 12 percent, what is Dybvig’s cost of equity capital?
Business
1 answer:
Anon25 [30]4 years ago
8 0

Answer:

Dybvig’s cost of equity capital is 15.7%

Explanation:

Capital asset pricing model measure the expected return on an asset or investment. it is used to make decision for addition of specific investment in a well diversified portfolio.

Formula for CAPM

Cost of Capital = Risk free rate + beta ( market return - risk free rate )

Cost of Capital = Rf + β ( Rm - Rf )

Cost of Capital = 4.6% + 1.5 ( 12% - 4.6% )

Cost of Capital = 15.7%

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A company is considering investing in a new machine that requires a cash payment of $47907 today. The machine will generate annu
swat32

Answer:

12%

Explanation:

Calculation for the internal rate of return if the company buys this machine

Using this formula

IRR = Initial investment/Annual Cash flow

Where,

Initial investment =$47,907

Annual Cash flow =$19,946

Let plug in the formula

IRR= $47,907/$19,946

=2.402

Using PV factor table = 2.402

IRR = 12%

Therefore internal rate of return if the company buys this machine will be 12%

8 0
4 years ago
Scenario 24-2 The price tag on a golf ball in 1975 read $0.20, and the price tag on a golf ball in 2005 read $2.00. The CPI in 1
zlopas [31]

Answer:

The price of the 1975 golf ball in 2005 is $0.55

Explanation:

In this question, we are asked to calculate the price of a golf ball in the year 2005 which was bought in the year 1975.

Before we begin to answer, we have been seeing CPI, what could this mean?

The term CPI stands for consumer price index. It refers simply to the change in price of a particular goods or services over a specific period of time.

Now, we mathematically propose a solution to the problem as follows;

We identify the following;

CPI in 1975 = 52.3

CPI in 2005 = 191.3

We now calculate the CPI change between the years. This can be done by dividing the CPI in the year 1975 by the CPI in the year 2005. Mathematically;

CPI change between years = CPI IN 1975/ CPI in 2005

= 52.3/191.3

= 0.273

Now, we proceed to calculate the price of the 1975 ball in 2005.

Mathematically;

A 1975 golf ball’s cost in 2005 = CPI change * price of golf ball in 2005

= 0.273 * 2

= $0.55

7 0
4 years ago
Read 2 more answers
Jim and Carolyn, who are married, establish a Coverdell Education Savings Account to pay for the future college expenses of thei
nasty-shy [4]

Answer:

$2000

Explanation:

CESA is a tax deferred account founded by the USA government  to support educational expenses for children that are not more than 18 years of age .

CESA , an acronym for coverdell education savings accounts allows a couple who filed jointly with a modified adjusted income that is not more than $220,000 to contribute not more than $2000 per student for each year.

The contribution is tax free assuming it is less than the account holder's annual adjusted qualifies expenses

5 0
3 years ago
For the firm below, give a classification of which market structure it most accurately fits. Briefly justify your classification
poizon [28]

Answer: Perfect competition

Explanation:

The market structure for a small scale corn farmer is perfect competition. The characteristics of perfect competition include:

1. Large Number of Sellers and Buyers: In a perfect competition, there are large number of buyers and sellers in the market. Producers are price takers and the seller cannot influence the price. There are numerous people on the market that sells corn and no seller can influence price.

2. Homogenous Products: The products are identical. Corn looks thesame and cannot be differentiated.

3. Perfect information. There is perfect information about the prices of products and other necessary information regarding the products. There's a perfect information regarding the corns that are sold.

(4) Free entry and exit: There's free entry and exit as new sellers are free to come into the market. There's no obstacle in the market.

6 0
3 years ago
Which of the following types of advertising is particularly expensive?
belka [17]
Could you put some options lol
5 0
3 years ago
Read 2 more answers
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