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Over [174]
3 years ago
10

Calculate the required rate of return for Mercury Inc., assuming that investors expect a 5% rate of inflation in the future. The

real risk-free rate is 3% and the market risk premium is 5%. Mercury has a beta of 2.0, and its realized rate of return has averaged 15% over the last 5 years. a. 20% b. 17% c. 18% d. 16% e. 15%
Business
1 answer:
My name is Ann [436]3 years ago
8 0

Answer:

Option C is correct.

<u>The required rate of return for Mercury Inc., assuming that investors expect a 5% rate of inflation in the future is 18%.</u>

Explanation:

Real risk free rate = 3%

Inflation Premium = 5%

Nominal risk free rate Rf = Real risk free rate + Inflation Premium = 3% + 5% = 8%

Market risk premium (Rm –Rf) = 5%

Beta = 2

As per CAPM, required rate of return = Rf + beta * (Rm – Rf) = 8% + 2 * 5% = 18%

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This is your chance to calculate demand elasticities for health care. Suppose you are collecting data from a country (like Japan
sergejj [24]

Answer:

Arc price elasticity of demand = -0.273

Explanation:

This problem is solved as follows:

1. Identify the data.

                   Outpatient visit       Price / visit

Tokyo           1.25 / month                  20y

Hokkaido      1.5 / month                   10y

Outpatient visits equal the quantities demanded of the service. Therefore, we can say that:

Qt (Outpatient visits in Tokyo) = 1.25 / month

Qh (Outpatient visits in Hokkaido) = 1.5 month.

With the following prices:

Pt (Price in Tokyo) = 20y

Ph (Price in Hokkaido) = 10 y

2. Apply the formula to calculate arc-elasticity of demand:

Ep^{arc} = \frac{Pt+Ph}{Qt+Qh} *\frac{Qh-Qt}{Ph-Pt}

We replace the data:

Ep^{arc} = \frac{20+10}{1.25+1.5} *\frac{1.5-1.25}{10-20}

Ep^{arc}= \frac{30}{2.75} *\frac{0.25}{-10} = 10.91 *-0.025

Ep^{arc} = -0.27275

Final answer: -0.27275 or -0.273

6 0
3 years ago
Loren Company's single product has a selling price of $15 per unit. Last year the company reported total variable expenses of $1
34kurt

Answer:

If the company applies the changes, income will increase by $28,500.

Explanation:

<u>First, we need to calculate the current number of units sold:</u>

Sales (dollars)= net income + fixed costs + total variable cost

Sales (dollars)= 30,000 + 90,000 + 180,000

Sales (dollars)= $300,000

Number of units= 300,000 / 15= 20,000

<u>Now, the selling price increases by 15%, and the number of units decreased by 10%:</u>

Unitary variable cost= 180,000/20,000= $9

Selling price= 15*1.15= $17.25

Number of units sold= 20,000*0.9= 18,000

Net operating income= 18,000*(17.25 - 9) - 90,000

Net operating income= $58,500

If the company applies the changes, income will increase by $28,500.

4 0
3 years ago
What is the term for a loan with a co-signer?
Nady [450]
I think it’s a consignment loan.
4 0
3 years ago
Pool Perfection provided pool maintenance services worth $1,600 during July; in June, the customers had paid in advance for thes
arlik [135]

Answer:

$1,600

Explanation:

It is important to note that the company uses accrual basis accounting. The Service Revenue account should be credited for $1,600

7 0
3 years ago
Refries Refrigerator Company manufactures ice-makers for installation in refrigerators. The costs per unit for 20,000 units of i
Elis [28]

Answer:

c. $600,000 vs. $528,000.

Explanation:

The computation of the relevant cost of make & buy is given below:

Total relevant cost of making the product is

= (cost per unit - unavoidable fixed cost per unit ) × 20,000 units

= ($34 - $4 ) × 20,000 units

= $600,000.

And, Total relevant cost of buying is

= (cost of buy per unit × 20,000 units ) - Contribution sale of water filtration = ( $28 × 20,000 units ) - ($80,000 - 60% of $80,000)

= $528,000

hence, the option c is correct

4 0
3 years ago
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