Answer:
subtracting the risk-free rate of return from the market rate of return
Explanation:
Market risk premium is the premium over the risk free rate that investors demand for holding a risky asset
Market risk premium = market rate of return - risk free rate
the higher the risk premium, the higher the return investors are demanding and the riskier the investment
for example if risk free rate is 5% , market rate of return in industry A is 10% while in industry B it is 20%
Market premium in A = 10% - 5% = 5%
Market premium in b = 20% - 5% = 15%
Answer:
The new cost of capital if this firm changes capital structure is 1.3
Explanation:
From the provided information:
All equity beta = 1
New D/E ratio = 0.5
Then, the new capital structure with levered beta is given by:
new capital structure = All equity beta *(1 + D/E*(1 - tax rate))
= 1*(1 + 0.5*(1 - 40%))
= 1.3
Therefore, The new cost of capital if this firm changes capital structure is 1.3
The involvement factors would be the price of the computer, the style, the model, and the things you could do with the computer.
Explanation:
The journal entry is as follows:
Land Dr $70,000
Additional paid in capital $5,000
To Common stock $75,000
(Being the common stock is issued in exchanged for cash)
The computation of the additional paid in capital is shown below:
= Common stock - the appraised value of land
where,
The common stock = 750 shares × $100 = $75,000
And, the appraised value of land is $70,000
So, the remaining balance is
= $75,000 - $70,000
= $5,000
The $5,000 would be recorded as an additional paid in capital
Answer:
Explanation:
The equation to calculate the <em>monthly payment</em> for fixed-rate loans is:
![Monthly\text{ }payment=Loan\times \bigg[\dfrac{r(1+r)^t}{(1+r)^t-1}\bigg]](https://tex.z-dn.net/?f=Monthly%5Ctext%7B%20%7Dpayment%3DLoan%5Ctimes%20%5Cbigg%5B%5Cdfrac%7Br%281%2Br%29%5Et%7D%7B%281%2Br%29%5Et-1%7D%5Cbigg%5D)
Where:
- Loan = $8500 - $300 = 8,200
- r is the monthly interest = 5.75% / 12 = 0.0575/12 ≈ 0.00479
- t is the number of moths = 36
Substituting:
![Monthly\text{ }payment=\$8,200\times \bigg[\dfrac{(0.0575/12)(1+(0.0575/12))^{36}}{(1+(0.0575/12))^{36}-1}\bigg]=\$ 248.53](https://tex.z-dn.net/?f=Monthly%5Ctext%7B%20%7Dpayment%3D%5C%248%2C200%5Ctimes%20%5Cbigg%5B%5Cdfrac%7B%280.0575%2F12%29%281%2B%280.0575%2F12%29%29%5E%7B36%7D%7D%7B%281%2B%280.0575%2F12%29%29%5E%7B36%7D-1%7D%5Cbigg%5D%3D%5C%24%20248.53)
