Your answer is going to be true.
Answer and Explanation:
a. The computation is shown below;
Cash bonus after tax is ($3,000 × (1 - 0.24) $2,280
And, non taxable fringe benefit is $2,300
So here he should use the nontaxable fringe benefit
b. Yes answer would be changed
Cash bonus after tax is ($3,000 × (1 - 0.12) $2,640
And, non taxable fringe benefit is $2,300
hence, the same is to be considered
Answer:
The risk free rate is 3.325%
Explanation:
The required rate of return or cost of equity of a stock can be calculated using the CAPM. The CAPM estimates the required rate of return of a stock based on three factors- risk free rate, stock's beta and the market risk premium. The equation of required rate of return under CAPM is,
r = rRF + Beta * (rM - rRF)
Where,
- rRF is the risk free rate
- rM is the return on market
- (rM - rRF) gives us the risk premium of market
We already have the values for r, Beta and rM. Plugging in these values in the formula, we calculate the rRF to be,
Let rRF be x.
0.1185 = x + 1.24 * (0.102 - x)
0.1185 = x + 0.12648 - 1.24x
1.24x - x = 0.12648 - 0.1185
0.24x = 0.00798
x = 0.00798/0.24
x = 0.03325 or 3.325%
Answer:
a. 2.23
b. 3.21
Explanation:
a. Answer to Part A
Payback Period = Investment / Annual Cash Inflow
= 250000 / 112115
= 2.23
Answer to Part B
Payback Period = Investment / Annual Cash Inflow
= 200000 / 62375
= 3.21
Working Note
<em>Particulars Case A Case B
</em>
After Tax Income 72115 39000
Add: Depreciation 40000 23375
Cash Inflow 11,2115 62375
<em>Particulars Case A Case B
</em>
Cost of Machine 250000 200000
Less: salvage Value 10000 13000
Depreciable Value 240000 187000
Life of the Asset 6 8
Annual Depreciation 40000 23375
Answer:
The answer is letter D.
Explanation:
It is reasonable to expect that the cyclical unemployment rate has been unaffected.
