Answer:
y = 50 %
Explanation:
As per the data given in the question, computation are as follows:
Expected return = y × expected rate of return for portfolio + (1 - y) × rate of T-bills
By putting the value from the given data in the above formula, we get
0.09 = y×0.12 + (1 - y)×0.06
0.09 = 0.12y + 0.06 - 0.06y
0.03 = 0.06 y
y = 0.50
= 50%
Answer:
A. 5.56%
B. 13.55%
Explanation:
In this question, we are asked to calculate the equity cost using the DCF method and the SML method
A. DCF approach
cost of equity =[ D0(1+growth )/ current price] +growth
= [.40 (1+.05) / 70 ] + .05
= [ .42 / 75] + .05
= .0056 +.05
= 0.0556 same as 5.56%
B)SML approach
Cost of equity = Rf +Beta (Rm-Rf)
= 5.8+ 1.25 (12 -5.8 )
= 5.8+ 1.25 *6.2
= 5.8 + 7.75
= 13.55%
<u>Answer:</u>
A firm’s positioning statement should address their target segment. Anything else they’ll say in the positioning statement will have "no" meaning to customers who are not in that segment.
<u>Explanation:</u>
A comprehensive overview of individual's target market as well as a clear image of how one want the audience to view an individual's brand, thus understood as "positioning statement". Any promotional and advertising decision one make about an individual's brand will comply with their positioning statement and endorse this.
For example, Nike's positioning statement is "Nike builds confidence for serious athletes that provides the perfect shoe for any sport."The concept of the Positioning Statement consists of four parts:
- the target,
- the category,
- the differentiator and
- the payoff.
Answer:
For 8,500 units, proposal A provides a higher income ($3,000).
Explanation:
Giving the following information:
Proposal A:
Fixed cost= $50,000
Unitary cost= $12
Proposal B:
Fixed cost= $70,000
Unitary cost= $10
<u>We need to choose the proposal with the higher income if 8,500 units are produced.</u>
Proposal A:
Net income= 8,500*(20 - 12) - 50,000
Net income= $18,000
Proposal B:
Net income= 8,500*(20 - 10) - 70,000
Net income= $15,000
For 8,500 units, proposal A provides a higher income ($3,000).
Answer:
1
Explanation:
Given that,
Weighted average cost of capital = 7%
After-tax cost of debt = 4 percent
Cost of equity = 10 percent
Let the debt of this firm be x, then the equity will be (1 - x),
wacc = (After-tax cost of debt × Debt) + (Cost of equity × Equity)
7% = (4% × x) + [10% × (1 - x)]
0.07 = 0.04x + 0.1 - 0.1x
0.07 = 0.10 - 0.06x
0.06x = 0.10 - 0.07
0.06x = 0.03
x = 0.5
Therefore, if the debt is 0.5 then the equity is 0.5.
Hence, the debt to equity ratio will be:
= 0.5 ÷ 0.5
= 1
The debt-equity ratio is 1 for the firm to achieve its targeted weighted average cost of capital.
