Part a: The market capitalization rate is 9.25%
Part b: The intrinsic value of the stock is $70.59
Market capitalization rate is another name for the stock's required rate of return. It is called the market capitalization rate because we can infer it by observing the market value of the stock. One way to find this rate is the capital asset pricing model (CAPM).
Part a:
Let,
r = market capitalization rate
f = risk free rate = 5%
m = return on the market = 10%
We can find the market capitalization rate with the help of the capital asset pricing model (CAPM),
The market capitalization rate is 9.25%.
Part b:
Let,
D be the dividend expected = $3
r be the interest rate = 9.25%
g = growth rate of dividends = 5%
The price is given by the dividend growth model:
The intrinsic value of the stock is $70.59
Learn more about CAPM:
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Answer:
2 tons of millet for New Zealand and 3 tons of millet for Brazil.
Explanation:
New Zealand and brazil both can produce corns and millet. The opportunity cost for Brazil is more than the New Zealand. Both the countries should go towards the production of the crop in which they have comparative advantage. New Zealand has comparative advantage in producing millet and Brazil has comparative advantage in producing corn.
Answer: Simple structure
Explanation:
Simple structure is a basic form of organizational design structure that has little work specialization, low departmentalization, wide spans of control and a centralized authority.
The centralized authority is usually the owner who has most of the power in the business and there are little formalization that govern the operation of the business. Example can be found in a local shoe business with few workers.
A company in its first stage of its operations is often called a startup. Where products and services are produced and your first customers are usually family or friends. It is in this stage where a company builds a strong foundation about customers, how to market the business and strict protection of cash flow.
Answer:
B) Contingency planning
Explanation:
When a person or an organization develops a contingency plan, it means that they developed their plan B (or even C). This means that you are planning ahead in case something doesn't go as it should or something really bad happens. This is exactly what FEMA does with NIMS, they make contingency plans in case of emergencies.
In this specific case, it is unlikely that a natural disaster destroys the store, but an economic catastrophe might hit it. Management is developing a contingency plan in case that sales plummet. This plan might include aggressive marketing promotions, reducing personnel, lowering costs, obtaining a loan, etc.
