Answer:
6.11%
Explanation:
For computing the variance, first we have to determine the expected return which is shown below:
= (Expected return of the boom × weightage of boom) + (expected return of the normal economy × weightage of normal economy) + (expected return of the recession × weightage of recession)
= (12% × 5%) + (10% × 85%) + (2% × 10%)
= 0.6% + 8.5% + 0.2%
= 9.30%
Now the variance would equal to the
= Weightage × (Return - Expected Return) ^2
For boom:
= 5% × (12% - 9.3%) ^2
= 0.3645
For normal economy:
= 85% × (10% - 9.3%) ^2
= 0.4165
For recession:
= 10% × (2% - 9.3%) ^2
= 5.329
So, the total variance would be
= 0.3645 + 0.4165 + 5.329
= 6.11%
Answer:
Compensation expense of $510,000 will be recorded each year 2021-2024
Explanation:
Stock option gives a right to employee to buy an amount of company stock at a given price in specified time period. It is charged as expense according to the fair value of the stock option every year until exercise-able date.
Compensation expense of $510,000 will be recorded each year 2021-2024
All the working is made in an MS Excel file and answer is made accordingly. Please find it.
Answer:
No, it is a bad idea to use only the cost of debt
Explanation:
Only using the cost of debt, is not a good idea because too much amount of borrowing could lose the confidence of the investors and it could lead to the uncertainty in the future cash flows.
Suppliers might be worried regarding the financial situation and lead to the supply disruption. Though, the debt might save the tax expenses, which could lead to the negative cash flow.
When the company does not have adequate amount of cash at hand, it could cause many disruptions of financial. WACC (Weighted Average Cost of Capital) rates need to be used as the capital costs as it weigh the used capital cost and the used debt.
D) all of the above
explanation: because all of the answers reflect why some people make bad investments
