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%
Answer:
c. Argues that a firm's first choice for capital is retained earnings as there is no informational cost associated with using retained earnings.
Explanation:
The Pecking order theory states that a business should first of all seek for internal funds (retained earnings) as a first choice of capital.
When internal funds are depleted, it can now look to debt as a source of finance.
In turn when debt options have been exhausted the last resort is to look for funding from equity.
So the Pecking order argues that a firm's first choice for capital is retained earnings as there is no informational cost associated with using retained earnings.
The manager at Pucoy Inc. Steve is performing appraisal for the employees, he is performing appraisal using the development trait of the performance appraisal.
<h3>What is Appraisal? </h3>
Appraisal is the process of reviewing an employee's performance, this is usually conducted on a semi annual or annual period. The performance appraisal is usually conducted by the line manager and or a HR representative.
Steve is showing good qualities as he is appraising the employees, He is also providing feedback on the area of improvement and also discussing the future growth options and strategies for the employee in the organization. This trait is a development use of performance appraisal.
Performance appraisals are an important part in an organization as it encourages the employees to work hard and effective. The annual salary increments are also based on this performance appraisals.
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Answer: Option C : $300; Negative $100
Linda's accounting profit = $300
Economic Profit= -$100
Explanation:
Total money generated = cost price x number of units = $100 x 10 = $1000
Profit = Total revenue generated - Cost of production = $1000 - $700 = $300
Linda's accounting profit = $300
Economic Profit = $300 - ($20 x 20hours)
Economic Profit= $300 - $400 = -$100
The coefficient for the <u>price elasticity of demand</u> is normally negative because the <u>demand curve</u><u> is </u><u>downward sloping. </u>
Price elasticity of demand:
- Shows how quantity demanded changes as a result of a change in price
- Is calculated by dividing the change in quantity demanded by the change in price
For normal goods, an increase in price leads to a decrease in quantity demanded. This is why the demand curve is downward sloping. If price goes up, quantity demanded will go down.
This change in quantity demanded will be shown as a negative number which means that when it is divided by the change in price, the price elasticity coefficient will be negative.
In conclusion, the price elasticity coefficient is usually negative because the demand is negative when prices increase.
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