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dezoksy [38]
3 years ago
15

The stock of Canadian Ski Wear is currently trading at $45 a share and the equity beta of the company is estimated to be 1.3. Th

e company is expected to pay a dividend of $1.50 a share next year, and this dividend is expected to grow at a rate of 4% per year. The rate on the 10-year U.S. Treasury bond is 4% and you estimate the market risk premium to be 5%. Using the CAPM, what is the company’s cost of equity?
Business
1 answer:
Vesnalui [34]3 years ago
6 0

Answer:

10.5%

Explanation:

In this question, we use the Capital Asset Pricing Model (CAPM). The formula is shown below:

Expected rate of return = Risk-free rate of return + Beta × market risk premium

= 4% + 1.3 × 5%

= 4% + 6.5%

= 10.5%

The market risk premium = Market rate of return - risk free rate of return.

The dividend and per share is not relevant for the computation part. Hence, ignored it

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3 years ago
Assume that the following events occurred at a division of Generic Electric for March of the current year:
Crank

Answer:

$192 million; $153.60 million; $38.40 million

Explanation:

Given that,

Direct material purchased = $80 million

Direct labor costs = $51 million

Manufacturing overhead = $77 million

Percent of the work-in-process completed = 80%

(1) Transfers-In:

= Direct materials + Direct labor costs + Manufacturing overhead

= (80% × $80 million) + $51 million + $77 million

= $64 million + $51 million + $77 million

= $192 million

(2) Transfer-out:

= Transfers-In × percent of the work-in-process completed

= $ 192 million × 80 %

= $ 153.60 million

(3) Ending Balance:

= Transfers-In - Transfer-out

= $192 million - $ 153.60 million

= $38.40

6 0
3 years ago
During the past month, Jennifer Johnson had income of $3,500. During the month, her net worth declined by $300. If no other fina
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7 0
2 years ago
Tomato sauce and spaghetti noodles are complementary goods. A decrease in the price of tomatoes will a. decrease consumer surplu
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Answer: c. increase consumer surplus in the market for tomato sauce and increase producer surplus in the market for spaghetti noodles.

Explanation:

A complementary good is the one which can be used only with another good. For example a CD can only run in a CD player or any other suitable device so the sales of CD is dependent upon the availability of device used to pay it. Other examples are tennis ball and tennis racket, mobile phone and sim cards, and others.

According to the given situation the decrease in price of tomato will be an advantage to the consumers as they will be able to purchase them with an affordable price and can produce tomato sauce this will promote the production of spaghetti noodles as tomato sauce is consumed along with spaghetti noodles this way the tomato sauce and spaghetti noodles are complementary goods for each other. The sales and production of one good will affect the sales and production of another.

6 0
3 years ago
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