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3 years ago

5

The stock of ABD, Inc. has a beta a 1.5 and an expected return of 11.6 percent. The expected return on the market is 11 percent.

What is the risk-free rate

1 answer:

GaryK [48]3 years ago

8 0

Answer:

im sorry

Explanation:

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Crisp Cookware's common stock is expected to pay a dividend of $1.75 a share at the end of this year (D1 = $1.75); its beta is 0

DedPeter [7]

Answer:

P3 = $96.9425 rounded off to $96.94

Explanation:

To calculate the market price of the stock three years from today (P3), we will use the constant growth model of DDM. The constant growth model calculates the values of the stock based on the present value of the expected future dividends from the stock. The formula for price today under this model is,

P0 = D1) / (r - g)

Where,

D1 is the dividend expected for the next period

g is the constant growth rate

r is the required rate of return on the stock

To calculate the price of the stock today (P0), we use the dividend expected for the next period (D1). So, to calculate the price at the end of 3 years (P3) we will use D4.

We first need to calculate r using the CAPM equation. The equation is,

r = rRF + Beta * rpM

Where,

rRF is the risk free rate

rpM is the market risk premium

r = 0.058 + 0.6 * 0.05

r = 0.088 or 8.8%

Using the price formula for DDM above and the values for P0, D1 and r, we can calculate the g to be,

80 = 1.75 / (0.088 - g)

80 * (0.088 - g) = 1.75

7.04 - 80g = 1.75

7.04 - 1.75 = 80g

5.29/80 = g

g = 0.066125 or 6.6125%

We first need to calculate D4.

D4 = D1 * (1+g)^3

D4 = 1.75 * (1+0.066125)^3

D4 = 2.12061793907

Using the formula from DDM for P3, we can calculate P3 to be,

P3 = 2.12061793907 / (0.088 - 0.066125)

P3 = $96.9425 rounded off to $96.94

4 0

3 years ago

Which of the following is most likely to exert the bargaining power of a buyer? A. The world's largest discount store Wal-Mar

PIT_PIT [208]

Answer:

A. The world's largest discount store Wal-Mart seeks vendors to supply products made exclusively for its stores.

Explanation:

Taking into consideration the <u>bargaining power of a buye</u>r in the Porter's Five Forces model, here it is evident that Wal-Mart is the only example of a strong, omnipresent buyer that can surely dictate the terms of the offer. Every vendor would want to sell their produce to Wal-Mart, due to their wide customer base and presence of numerous stores.

7 0

3 years ago

Max and Lew have entered into a contract for Lew to paint Max’s house. The contract specifically states that the job was to be c

mars1129 [50]

Answer:

The correct answer is letter "D": nominal damages.

Explanation:

Nominal damages are granted as monetary rewards when a legal fault takes place but there has not been substantial damage because of it. It is said that the fact of granting the fault represents more of a moral act. Usually, if awarded, the plaintiff may receive $1 or $2.

In the case, as Max suffered no loss because of Lew's delay while painting his house, if he decides to sue him he will be awarded nominal damage for the contract breach.

3 0

3 years ago

Lake Power Sports sells jet skis and other powered recreational equipment. Customers pay one-third of the sales price of a jet s

ValentinkaMS [17]

Answer:

$650,000

Explanation:

Calculation to determine what Lake would report in its December 31, 2021, balance sheet

First step is to calculate Net installment Receiveble for 2020 sales

2020 sales Installment Receiveble 300,000

($900,000-$300,000 2018 Collection -$300,000 2021 Collection)

Less Deferred gross profit $150,000

(450,000-$150,000 2020 collection-$150,000 2021 collection )

Net installment Receiveble for 2020 sales $150,000

Second step is to determine Net installment Receiveble for 2021 sales

2021 sales Installment Receiveble $860,000

($1,290,000-$430,000

Less Deferred gross profit $360,000

($600,000-$240,000)

Net installment Receiveble for 2021 sales $500,000

Now let determine what Lake would report in its December 31, 2021, balance sheet

December 31, 2021, balance sheet=$150,000+$500,000

December 31, 2021, balance sheet=$650,000

Therefore In its December 31, 2021, balance sheet, Lake would report: $650,000

6 0

3 years ago

On March 15, 2017, Gilbert Construction contracted to build a shopping center at a contract price of $220 million. The schedule

Margaret [11]

Answer:

a. 2017 2018 2019

Expenses incurred for the year A 36 million 81 million 63 million

Estimated total cost B 180 million 180 million 180 million

% Completion (A/B) C 20% 45% 35%

Revenue recognized for the D 44 million 99 million 77 million

period (220 million * C)

Gross profit (D-A) $8 million $18 million $14 million

b. Yes, the cost-to-cost method provides a good measure of this construction company's performance under the contract.

3 0

3 years ago