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3 years ago

Which of the following statements is true?

Business

1 answer:

netineya [11]3 years ago

4 0

Answer:

d. The present value of perpetuity varies directly with the annual repayments.

Explanation:

A perpetuity is a security or bond which pays a fixed amount of cash flow at a fixed interval forever. So the amount it pays stays the same and it keeps paying for ever. The formula to find the present value of a perpetuity is

Cash flow of perpetuity/Interest Rate

So if the annual payment is 100 and the interest rate is 5% the present value of the annuity is

100/0.05=2,000

If we keep the interest rate the same at 5% and increase the cash flow by 100 to 200 the new present value of the perpetuity is

200/0.05=4,000

This proves that the present value of a perpetuity varies directly with the annual repayments or cash flow of perpetuity.

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Mikkelson Corporation's stock had a required return of 12.50% last year, when the risk-free rate was 3% and the market risk prem

enot [183]

Answer:

a. 16.50%

Explanation:

Find the beta as of last year using CAPM;

CAPM ; r = risk free + beta(Market risk premium)

0.125 = 0.03 + beta(0.0475)

Subtract 0.03 from both sides;

0.125-0.03 = 0.0475beta

0.095 = 0.0475beta

Divide both sides by 0.0475;

0.095/0.0475 = beta

beta = 2

Next, use CAPM again to find the new required return with a market risk premium is 4.75%+ 2% = 6.75%

r = 0.03 + 2(0.0675)

r = 0.03 + 0.135

r = 0.165 or 16.5%

Therefore, the new required return is 16.5%

6 0

3 years ago

In the capitalization versus expensing case the main ethical issue is whether gloria hernandez should?

nata0808 [166]

In the capitalization versus expensing case the main ethical issue is whether Gloria Hernandez should capitalize or expense one millions dollars of expenditures.

<h3>What is meant by capitalization?</h3>

This is the term that is used in accounting to talk about the fact that an item can be recorded as an asset. What this means is that the expenditure is going to be made to appear in the balance sheet and it would not have to appear in the income statement.

Hence we have to say that In the capitalization versus expensing case the main ethical issue is whether Gloria Hernandez should capitalize or expense one millions dollars of expenditures.

Read more on capitalization here: brainly.com/question/1293334

#SPJ1

4 0

1 year ago

If a bank that desires to hold no excess reserves and has just enough reserves to meet the required reserve ratio of 10 percent

Misha Larkins [42]

Answer:

c. $360 increase in excess reserves and a $40 increase in required reserves

Explanation:

Required reserves is the amount of reserves that is required by the Central bank that banks should keep.

Required reserve = reserve ratio × deposit

= 0.1 × $400 = $40

Excess reserve is the amount of reserves kept in excess of the required reserves.

Excess reserve = Deposit - Required reserve = $400 - $40 = $360

I hope my answer helps you

4 0

3 years ago

Suppose touchtech, a hand-held computing firm, is selling bonds to raise money for a new lab—a practice known as finance. buying

AysviL [449]

<span>Buying a bond does not constitute ownership in a company. In the event that Touchtech, or any firm that issues a bond, runs into financial difficulty, bondholders are the first to be paid. Sean, as a bondholder, would be among the first paid.</span>

8 0

2 years ago

The restaurant's total cost is a mixed cost that depends on customers served. The restaurant's management uses the high-low meth

harina [27]

Answer:

$29,390

Explanation:

For computing the total cost first we have to determine the variable cost per customer and the fixed cost which is shown below:

Variable cost Per Customer is

= (High total cost - low total cost) ÷ (high number of customer served - low cost of customer served)

= ($28,934 - $28,241) ÷ (14,100 - 11,214)

= $0.24

Now

Fixed cost is

= High cost - (high number of customer served × variable cost per customer)

= 28,934 - (14,100 × 0.24)

= $25,550

So, the total cost for 16,000 customers is

= Fixed cost + variable cost

= $25,550 + (16,000 × $0.24)

= $29,390

7 0

3 years ago