An individual who has NO prior experience in starting up a business, inheriting a business or purchasing a business.

The risk free rate of return is 2.5% and the market risk premium is 8%. Rogue Transport has a beta of 2.2 and a standard deviati

4vir4ik [10]

Answer:

20.1%

Explanation:

In capital asset prcing model (CAPM), cost of equity (or cost of retained earnings in this context) is calculated as below:

Cost of equity = risk-free rate of return + beta x (market index return - risk-free rate of return)

Please note that (market index return - risk-free rate of return) is equal to market risk premium

Putting all the number together, we have:

Cost of equity/retained earnings = 2.5% + 2.2 x 8% = 20.1%

Note: The dividend growth rate, tax rate & stock standard deviation is not relevant in answering the question.

6 0

3 years ago

Barney decides to quit his job as a corporate accountant, which pays $10 890 a month, and goes into business for himself as a ce

mash [69]

Answer:

a. Barney's monthly explicit costs: $161;

b. Barney's monthly implicit costs: $11,816;

c. Barney's monthly economic costs: $11,977

Explanation:

a.

Barney's monthly explicit costs include any costs that he actually paid extra every month as the result from running his business including: cost of office supplies + cost of electricity bill = $71 + $90 = $161

b.

Barney's monthly implicit costs include any cost that he does not actually pay extra, yet he has to sacrifice these income as the results of running his business which includes: Cost related to his salary sacrifice + Cost related to his apartment rental = 10,890 + 926 = $11,816

c. Barney's monthly economic costs = Barney's monthly explicit costs + Barney's monthly implicit costs = $11,977

7 0

3 years ago

Read 2 more answers

Mars Inc. produces 100,000 boxes of Snickers bars which sell for $4 a box. If variable costs are $3 per box, and it has $150,000

IceJOKER [234]

Answer:

It should continue the production in the short-run.

Explanation:

Given the unit produced by Mars Inc. = 100000 boxes.

The selling price of boxes = $4 per box.

The variable costs = $3 per box.

The fixed costs = $150000

The total sales revenue = number of boxes × selling price

= 100000 × 4

= $ 400000

In the short run, the firm should continue its production because it still covers the variable costs.

8 0

3 years ago

Rachel's Recordings reported net income of $250,000. Beginning balances in Accounts Receivable and Accounts Payable were $18,000

pentagon [3]

Answer:

Rachel's net cash flows from operating activities would be $264,500

Explanation:

In order to calculate Rachel's net cash flows from operating activities we would have to calculate the following formula:

cash flows from operating activities=Net income+Increase in accounts payable+ decrease in accounts payable

Net income=$250,000

Increase in accounts payable=Ending balance-Beginning Balance

Increase in accounts payable=$30,000-$23,000

Increase in accounts payable=$7,000

decrease in accounts payable=Ending balance-Beginning Balance

decrease in accounts payable=$10,500-$18,000

decrease in accounts payable=$7,500

Therefore, cash flows from operating activities=$250,000+$7,000+$7,500

cash flows from operating activities=$264,500

Rachel's net cash flows from operating activities would be $264,500

8 0

3 years ago

Which of the following is not true of depreciation accounting?

tekilochka [14]

Answer:

B. Depreciation allocates replacement values as part of the matching of revenues and expenses.

Explanation:

Depreciation allocates replacement values as part of the matching of revenues and expenses is not entirely true about depreciation accounting.

6 0

3 years ago