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docker41 [41]
3 years ago
14

Old Town Industries has three divisions. Division X has been in existence the longest and has the most stable sales. Division Y

has been in existence for five years and is slightly less risky than the overall firm. Division Z is the research and development side of the business. When allocating funds, the firm should probably:
Business
2 answers:
Cloud [144]3 years ago
5 0

Answer:

D) assign the highest cost of capital to Division Z because it is most likely the riskiest of the three divisions.

Explanation:

When a corporation's business units clearly have differentiated risks associated to their activities, the corporation can assign different capital structures to each division and if possible calculate their own weighted average cost of capital (WACC).

One of the basic premises in business, is that investors are risk adverse. This means that investors will require higher returns from riskier investments. WACC has two main components: shareholder equity and debt (either loans, bonds, preferred stock). Debt should cost the same for every division, but shareholder equity shouldn't.

It is the same reason why a subsidiary that operates in Australia has a lower WACC than a subsidiary operating in South America, and that one has a lower WACC than a subsidiary operating in Africa. Higher risk always demands higher returns.

blagie [28]3 years ago
4 0

Answer:

D.

Explanation:

Based on the scenario being described within the question it can be said that when allocating funds, the firm should probably assign the highest cost of capital to division Z because it is most likely the riskiest of the three divisions. This is because Division Z focuses on research and development which means that they might not actually discover or create something that can bring value to the company and is therefore highly risky.

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The Stagnant Growth Corporation has paid a constant dividend of $2.50 per year for the past 3 years and is expected to continue
AleksAgata [21]

Answer:

20.83%

Explanation:

Data provided

Dividend = $2.50

Required rate of return = 12%

The computation of the current price of the stock is shown below:-

The current price of stock = Dividend ÷ Required rate of return

= $2.50 ÷ 12%

= 20.83%

So, for computing the current price of the stock we simply divide the dividend by required rate

6 0
3 years ago
Everything that consumers evaluate when deciding whether to buy a good or service is called the
Hunter-Best [27]
Everything that consumers evaluate when deciding whether to buy a good or service is called the total product offer. Before making a decision to buy a product, a consumer will evaluate everything about the product from a need to a want, price, design, benefits you know it. When they have finished evaluating it, they make a decision whether or not they want to purchase the product or service. 
5 0
3 years ago
3. Which answer best shows all of the
kogti [31]

Answer:

liquidity, risk, time, and return

Explanation:

For choosing an investment, following things need to be considered

1. Liquidity : It means how the asset is converted into cash it shows the how an asset purchased or sold in the market without varies in the price

2. Risk: It is a possibility where it can be less than the predicted gain or the loss instead of profit

3. Time: How much time is required to have a profit

4 Return: The amount which you have invested in return how much it comes.

It could be measured by dividing the net profit from the net worth

Therefore the above is the answer

7 0
2 years ago
Read 2 more answers
In producing a budget constraint line for combinations of staples and paper clips, which are sold by the box, a student labels t
kumpel [21]

Answer:

Boxes of staples (maximum) that can be purchased by available income are 5.

Maximum boxes of paper clips that can be purchased by available income are 10.

Explanation:

Budget Line is the graphical representation of product combinations, that consumer can purchase with prices & income (spending all income).

It is downward sloping - as given same income & price levels, one good's consumption can be increased by reducing consumption of other good.

The intercept of downward sloping budget line is the maximum amount of that axis good which that consumer can consume with given income, price.

That maximum amount of purchasable good is Income/price of that good. Eg: Income = 100, Price of Good 1 on X axis = 10, Price of Good 2 on Y axis = 5. So :

  • Maximum amount of good 1 purchasable = 100/10 = 10. It is on X axis, x axis intercept is (10,0) ; and
  • Maximum amount of good 2 purchasable =  100/5 = 20. It is on Y axis, y axis intercept is (0,5)

Good 1 & Good 2 are analogous to Staples & Paper Clips respectively.

5 0
3 years ago
Given the following information, calculate the total amount of annual operating expenses for this income-producing property: min
stira [4]

Answer:

$100,000

Explanation:

Operating expenses refers to the expenses incurred by the firm at the time of starting the business.

Total amount of annual operating expenses for this income-producing property:

= minor roof repairs + property taxes + maintenance + janitorial + security

= $20,000 + $30,000 + $25,000 + $15,000 + $10,000

= $100,000

8 0
3 years ago
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