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Mnenie [13.5K]
3 years ago
11

Linke Motors has a beta of 1.30, the T-bill rate is 3.00%, and the T-bond rate is 6.5%. The annual return on the stock market du

ring the past 3 years was 15.00%, but investors expect the annual future stock market return to be 13.00%. Based on the SML, what is the firm's required return?
Business
1 answer:
anzhelika [568]3 years ago
4 0

Answer:

cost of capital 16%

Explanation:

SML formula:

Ke= r_f + \beta (r_m-r_f)\\\\Where:\\r_f =$ risk free rate\\r_m= $ market rate\\\beta =non-diversifiable \:risk

r_f = 3%

β = 1.3

r_m = 13%

0.03 + 1.3(0.13-0.03)

firm's required return = .16 = 16%

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Mary is in contract negotiations with a publishing house for her new novel. She has two options. She may be paid $100,000 up fro
Mazyrski [523]

Rule I is correct.

<u>Explanation:</u>

Year Cash flow Pv at 8% Discounted cash flow

0           100000              1         100000

1            26000              0.9259 24074.074

2            26000               0.8573 22290.809

3             26000         0.7938 20639.638

4             26000      0.7350 19110.776

5             26000       0.6806 17695.163

From the above calculation, the net present value is $203810.46

          Option 1   Option 2

NPV 203810.5 200000

Payback    5 years   0 years

IRR             No IRR No IRR

NPV (Net present value) option say that former would be selected

So, answer is Rule I only.

5 0
3 years ago
if Lei bikes to and from work everyday in order to train for the Olympics what is important to Lei? hey her A.job outlook B. her
Dmitry_Shevchenko [17]

C. Her Lifestyle , I Think


6 0
3 years ago
Read 2 more answers
When channel members are linked by legal agreements that specify each member's rights and responsibilities, ____ exists.
Ne4ueva [31]

Answer:

D. a contractual VMS

Explanation:

  • A contractual VMS is a Vertical Marketing System that is formed by the individual firms operating at different channel layers.
  • Has integrated operations at a contractual basis and each layer helps in the achievement of the economy of scale by the integration of their operations.
  • <u>Hence they share their rights and responsibilities be it the producer, the wholesaler, or the retailer thus having all the elements of production and distribution channel fall in a single ownership in their legal agreements.</u>
4 0
3 years ago
According to the quantity theory of money, a 5 percent increase in money growth increases inflation by ___ percent. According to
lina2011 [118]

Answer:

both blanks can be filled by <u>5%</u>

Explanation:

The quantity theory of money states that there is a proportional relationship between the money supply and the general level of prices. An increase in the money supply will increase the general level of prices in the same proportion (called inflation).

The Fisher equation measures the relationship between nominal and real interest rates. Real interest rate = nominal interest rate - inflation rate.

So if inflation increases, the nominal inflation rate will increase to keep the real interest rate the same.

8 0
3 years ago
Shalit Corporation’s 2008 sales were $12 million. Its 2003 sales were $6 million. a. At what rate have sales been growing? b. Su
Inga [223]
(12-6)/12 gives you the growth rate *over five years* (115%)
divide that by 5 and you get an average rate of 23% growth per year.
If we’re rounding, yes, that statement is correct. Otherwise, growth over five years doubled because there was a growth of 115% and year-over-year growth was 23%.
6 0
3 years ago
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