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Sonja [21]
3 years ago
8

Wild Swings Inc.’s stock has a beta of 2.5. If the risk-free rate is 6% and the market risk premium is 7%, what is an estimate o

f Wild Swings’ cost of equity?
Business
1 answer:
Bess [88]3 years ago
3 0

Answer:

r = 0.235 or 23.5%

Explanation:

Using the CAPM, we can calculate the required/expected rate of return on a stock. This is the minimum return required by the investors to invest in a stock based on its systematic risk, the market's risk premium and the risk free rate.  

The formula for required rate of return under CAPM is,

r = rRF + Beta * rpM

Where,

  • rRF is the risk free rate
  • rpM is the market return

r = 0.06 + 2.5 * 0.07

r = 0.235 or 23.5%

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A mining company owns two mines, each of which produces three grades (high, medium, and low) of ore. The company has a contract
sashaice [31]

Answer:

They should operate Mine 1 for 1 hour and Mine 2 for 3 hours to meet the contractual obligations and minimize cost.

Explanation:

The formulation of the linear programming is:

Objective function:

C=200M_1+160M_2

Restrictions:

- High-grade ore: 6M_1+2M_2\geq12

- Medium-grade ore: 2M_1+2M_2\geq8

- Low-grade ore: 4M_1+12M_2\geq24

- No negative hours: M_1,M_2\geq0

We start graphing the restrictions in a M1-M2 plane.

In the figure attached, we have the feasible region, where all the restrictions are validated, and the four points of intersection of 2 restrictions.

In one of this four points lies the minimum cost.

Graphically, we can graph the cost function over this feasible region, with different cost levels. When the line cost intersects one of the four points with the lowest level of cost, this is the optimum combination.

(NOTE: it is best to start with a low guessing of the cost and going up until it reaches one point in the feasible region).

The solution is for the point (M1=1, M2=3), with a cost of C=$680.

The cost function graph is attached.

7 0
3 years ago
Crane Company incurred the following costs for 88000 units: Variable costs $528000 Fixed costs 392000 Crane has received a speci
Anton [14]

Answer:

The minimum price is $6.8

Explanation:

Giving the following information:

Crane Company incurred the following costs for 88000 units: Variable costs $528000 Fixed costs 392000 Crane has received a special order from a foreign company for 3000 units. There is sufficient capacity to fill the order without jeopardizing regular sales. Filling the order will require spending an additional $2400 for shipping.

Because it is a special order and there is unused capacity, we will not have into account the fixed costs.

Unitary cost= (528,000/88,000) + (2,400/3,000)= $6.8 per unit

The minimum price is $6.8

7 0
3 years ago
Staffing is a less important management function today than in the past true or false
In-s [12.5K]

Answer: statement is false

6 0
2 years ago
Read 2 more answers
The Verizon CEO stated, "Corporate responsibility starts with a belief that what you do is important to society. This belief is
AleksAgata [21]

Answer:

corporate mission or marketing strategy area

Explanation:

Based on the information provided it can be said that this is an example of the corporate responsibility strategy being a part of the corporate mission or marketing strategy area. This refers to a specific sentence that encompasses the company's function, philosophies and goals which they strive to achieve and is the entire reason for existing in the market.

8 0
3 years ago
He kelly family and the stewart family each used their sprinklers last summer. the water output rate for the kelly family's spri
tigry1 [53]
This problem is actually under the subject of Mathematics, particularly, Algebra. For work problems, you can use a convenient technique of dimensional analysis. This is done by multiplying units of measurement, then cancelling out like terms in order to come up with the units of the final answer. For this problem, the total amount of liters is 2,100. So, the equation would be

Volume of Kelly's family + Volume of Stewart's family = 2,100

However, we are only given the rates for each family in liters per hour. To come up with the final answer with a unit of measurement in Liters, we must multiple the rate of L/hour with the individual time. Let x be the time Kelly's sprinkler was used, and y for Stewart's family.

(20 L/h)(x hours) + (40 L/h)(y hours) = 2,100

This is the first equation. The second equation is the total time. 

x + y = 65 hours

Rearranging the equation, y = 65 - x. Let's substitute this to the first equation.

20x + 40(65-x) = 2,100

Solving for x, then substituting it to the second equation to obtain y,

x = 25 hours
25 + y = 65
y = 40 hours.

Thus, Kelly's sprinkler was used for 25 hours, while Stewart's sprinkler was used for 40 hours.
8 0
3 years ago
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