Answer:
Risk free rate(Rf) = 1.5%
Market return(Rm) = 8%
Beta(β) = 0.8
ER(P) = Rf + β(Rm – Rf)
ER(P) = 1.5 + 0.8(8-1.5)
ER(P) = 1.5 + 0.8(6.5)
ER(P) = 1.5 + 5.2
ER(P) = 6.7%
Alpha = Annual average return - ER(P)
= 7.2% - 6.7%
= 0.5%
Explanation:
In this case, we will calculate the expected return on the stock based on CAPM. Thereafter, we will calculate alpha by deducting the expected return from annual average return.
Answer:
If discount rate is 11.7% Project B should be accepted.
If discount rate is 13.5% both projects should be rejected
Explanation:
If the Net present value of Project A is higher than that of project B, we will accept project A and vice versa.
<u>Under 11.7% Discount Rate</u>
Net Present Value-Project A = -82000 + 34000 / 1.117 + 34000 / 1.117² + 34000 / 1.117³ = $85.099
Net Present Value-Project B = -82000 + 115000 / 1.117³ = $516.029
Project B should be accepted as it has a higher NPV.
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<u>Under 13.5% Discount Rate</u>
Net present Value-Project A = -82000 + 34000 / 1.135 + 34000 / 1.135² + 34000 / 1.135³ = - $2397.49
Net Present Value-Project B = -82000 + 115000 / 1.135³ = - $3347.91
Both projects should be rejected as both have negative NPVs
Idk idk idk idk idk idk im sorry btw its just for the starting thing
Fees charge = 2%
Investment worth = $500,000
Amount due = 2/100 * 500,000 = 10,000
The amount Andrew will receive as compensation is $10,000.
Answer:
LeCompte Corp.
The profit margin that LeCompte Corp. would need in order to achieve the 15% ROE, holding everything else constant is:
A) 7.57%.
Explanation:
a) Data and Calculations:
Assets = $312,900
Common Equity = Assets = $312,900
Sales for the last year = $620,000
Net income after taxes = $24,655
Expected return on equity (ROE) = 15%
ROE (in amount) = $312,900 * 15% = $46,935
Profit margin = Returns on Equity/ Sales * 100
= $46,935/$620,000 * 100
= 7.57%
b) The expected returns on equity in dollars is equal to the net income. Therefore, we can use the ROE to calculate the profit margin. The profit margin expresses the relationship between sales and profit. It shows the profit made from each dollar sales.
