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Damm [24]
3 years ago
14

We Do Bankruptcies is a law firm that specializes in providing advice to firms in financial distress. It prospers in recessions

when other firms are struggling. Consequently, its beta is negative, −0.2. a. If the interest rate on Treasury bills is 6% and the expected return on the market portfolio is 16%, what is the expected return on the shares of the law firm according to the CAPM?
Business
1 answer:
joja [24]3 years ago
8 0

Answer:

4%

Explanation:

In this question, we apply the Capital Asset Pricing Model (CAPM) formula which is shown below

Expected rate of return = Risk-free rate of return + Beta × (Market rate of return - Risk-free rate of return)

= 6% - 0.2 × (16% - 6%)

= 6% - 0.2 × 10%

= 6% - 2%

= 4%

The (Market rate of return - Risk-free rate of return)  is also known as market risk premium

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Read 2 more answers
T Company expects to incur the following per unit costs for 1,000 units of production: Direct materials of 4 pounds per unit at
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Answer:

Total overhead =  = $7,500

so here correct option is E. $7,500

Explanation:

given data

production = 1,000 units

direct labor = ¼ hour @ $24 per hour

variable overhead = 75 % of direct labor

fixed overhead = $3,000

to find out

total amount of overhead

solution

we first find Direct labor that is

Direct labor = ¼ × 24

Direct labor = $6

so

Total overhead will be here

Total overhead = Variable overhead + Fixed overhead     .................1

now put here value we get

Total overhead = ($6 ×  75% ) × 1,000 + $3,000

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