Answer: 12.5%
Explanation:
Given the following :
Beta (B) = 1.3
Marginal tax rate = 34%
Risk free interest rate = 6%
Market rate of return = 11%
The cost of equity is calculated using the relation:
Risk free rate of return + Beta(market rate of return - risk free rate of return)
Cost of equity = 6% + 1.3(11% - 6%)
Cost of equity = 6% + 1.3(5%)
Cost of equity = 6% + 6.5%
Cost of equity = 12.5%
Therefore, the firm's cost of internal equity is 12.5%
You sneak up behind them and tackle them. That will do it!
Cost-push inflation will reduce supply and lower real output and employment which will eventually generate an "economic recession".
<h3>What is economic recession?</h3>
The National Bureau of Economic Research (NBER) describes a recession as "a large fall in economic activity distributed across the economy, lasting more than a few months."
Some characteristics of economic recession are-
- Recessions are marked drops in economic activity that can endure for several months or even years.
- When a country's economy faces negative gross domestic product (GDP), growing unemployment, declining retail sales, and contraction income and manufacturing metrics over an extended period of time, experts declare a recession.
- Recessions are regarded as an inevitable component of the economic cycle, or the predictable rhythm of expansion and recession in a country's economy.
- The organisation bases its decision on a variety of variables, such as GDP, real income, employment, industrial production, and consumer spending.
To know more about economic recession, here
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Answer:
Accepted and rejected
Explanation:
Since the internal rate of return is 13.09% and the WACC is 12.68%
As we can see that the internal rate of return is higher than the WACC as WACC is considered as the discount rate
So the project should be accepted
And, if CAPM is used
So, the expected rate of return is
If CAPM is used
Risk-free rate of return + Beta × market risk premium
= 2.9% + 1.42 × 8.1%
= 2.9% + 11.502%
= 14.40%
And, The Internal rate of return = 13.09%
Since the internal rate of return is less than the expected rate of return therefore the project should be rejected
Answer: B. Jean
Explanation:
Having Absolute Advantage in the production of a good means that you can produce more of that good given the same resources or at least the same Quantity as others given lower resources.
From the scenario above therefore, Jean has the Absolute Advantage in producing Cakes as Jean can bake 12 cakes in an hour while Vincent can only bake 10.
