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evablogger [386]
3 years ago
15

Mikkelson Corporation's stock had a required return of 12.50% last year, when the risk-free rate was 3% and the market risk prem

ium was 4.75%.
Then an increase in investor risk aversion caused the market risk premium to rise by 2%. The risk-free rate and the firm's beta remain unchanged.

What is the company's new required rate of return?

(Hint: First calculate the beta, then find the required return.) Do not round your intermediate calculations.

a. 16.50%

b. 13.04%

c. 12.87%

d. 12.71%

e. 14.36%
Business
1 answer:
enot [183]3 years ago
6 0

Answer:

a. 16.50%

Explanation:

Find the beta as of last year using CAPM;

CAPM ; r = risk free + beta(Market risk premium)

0.125 = 0.03 + beta(0.0475)

Subtract 0.03 from both sides;

0.125-0.03 = 0.0475beta

0.095 = 0.0475beta

Divide both sides by 0.0475;

0.095/0.0475 = beta

beta = 2

Next, use CAPM again to find the new required return with a market risk premium is 4.75%+ 2% = 6.75%

r =  0.03 + 2(0.0675)

r = 0.03 + 0.135

r = 0.165 or 16.5%

Therefore, the new required return is 16.5%

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Inflation can impose significant costs and adversely distort economic systems. Indicate whether the costs and distorting effects
kaheart [24]

Answer:

1. Menu costs

- Can lead to stores listing prices in more stable currencies.

- Causes costs associated with changing prices in stores.

2. Shoe-leather-costs

- Discourages people from holding money.

- Spending time converting money into something that better holds value.

3. Unit-of-account costs

- Can reduce the quality of economic decisions.

- Makes money a less reliable source of measurement.

- Can cause distortion to the tax system.

- Causes difficulty in firms and individuals financial planning.

3 0
3 years ago
A Swedish tour guide has devised a clever way for his clients to recognize him. He owns 13 pairs of shoes of the same style, cus
Bezzdna [24]

Answer:

P(13,2) = 169

Explanation:

We have to calculate the combinations for left and right shoe considering is not the same having a right shoe blue and left red than having a right shoe rend and a left red.

there are 13 pairs from whcih she will take a single pair:

P(n,r) = n^{r} \\

where:

n = number of pair = 13

r = shoes = 2 (one on each foot)

P(n,r) = 13^{2} \\

P(13,2) = 169

5 0
3 years ago
The widespread use of mobile devices such as tablets has resulted in employees bringing their own devices into the workplace and
Marta_Voda [28]

The answer to this question is Bring Your Own Device or also known as (BYOT).

<span>Bring your own device is allowing employees or workers to bring their own gadgets like laptop, tablets, mobile phones (smart phones) in the work area to be used at work and connect to the company network, internet, and office applications while working. The benefits of this policy are that it can lower the cost of the company to purchase computers and it also can increase productivity of employees. </span>
7 0
3 years ago
Consumer surplus is greater than producer surplus when the demand curve is ____; producer surplus is greater than consumer surpl
mash [69]

When the price at which items are sold exceeds what it costs businesses to produce those goods, there is a producer surplus. The region to the left of the quantity sold, below the price, and above the supply curve is known as the producer surplus.

Consumer surplus is represented by a horizontal line drawn between the y-axis and demand curve and is defined as the region below the downward-sloping demand curve, or the amount a consumer is prepared to spend for certain quantities of an item, and above the actual market price of the good.

Producer surplus decreases when the equilibrium price falls. The producer surplus is intimately correlated with changes in the demand curve. Producer surplus rises as demand rises. Reduced demand results in reduced producer surplus.

To learn more on equilibrium price

brainly.com/question/21329957

#SPJ4

3 0
2 years ago
A start-up internet service provider expects to gain money in each of the first four years. Gains are projected to be $50 millio
ipn [44]

Answer:

A. Draw the cash flow diagram.

since the site doesn't include a drawing tool I just prepared a table to depict cash flows associated to years one through four:

Year                   Cash inflows

1                            $50 million        

2                           $60 million  

3                           $70 million  

4                           $100 million  

B. What is the present worth of the gains for the first three years?

  • the present value of the first three cash flows = $50/1.1 + $60/1.1² + $70/1.1³ = $45.45 + $49.59 + $52.59 = $147.63 million

C. What is the present worth of the gains for all four years?

  • the present value of the first three cash flows = $50/1.1 + $60/1.1² + $70/1.1³ + $100/1.1⁴ = $45.45 + $49.59 + $52.59 + $68.30 = $215.93 million

D. What is the equivalent uniform annual worth of the gains through year four?

  • equivalent annual worth = (NPV x r) / [1 - (1 + r)⁻ⁿ] = ($215.93 x 0.1) / [1 - (1 + 0.1)⁻⁴] = 21.593 / 0.31699 = $68.12 million

3 0
4 years ago
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