Answer:
Higher than 0.5%
Explanation:
Since the rate of return is calculated as dividend payment/stock price + dividend growth rate and since that growth rate for the next five years will be 0.5 %, than rate of return will be higher than 0.5 %.
Answer:
finished cost = $200,000
inventory cost=$250,000
manufactured cost= $600,000
cost of good= beginning inventory+purchase during period cost- ending inventory
$600,000+$200,000-$250,000
$550,000
Answer:
MILLER STORES
Ke = Rf + β(Market risk premium)
12.7 = Rf + 1.38(7.4)
12.7 = Rf + 10.212
Rf = 12.7 - 10.212
Rf = 2.488%
DIVISION A
Ke = Rf + β(Risk premium)
Ke = 2.488 + 1.52(7.4)
Ke = 2.488 + 11.248
Ke = 13.74%
Explanation:
First and foremost, we need to calculate risk-free rate using the data relating to Miller Stores. In this case, the cost of equity, beta and market risk premium of Miller Stores were provided with the exception of risk-free rate. Then, we will make risk-free rate the subject of the formula.
We also need to calculate the cost of capital of division A, which is risk-free rate plus beta multiplied by the market risk-premium.
