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3 years ago

An all-equity firm is considering the following projects:

Business

1 answer:

FromTheMoon [43]3 years ago

4 0

Answer:

Projects Y and Z

b. Projects W and Z

c. Projects W and Y

Explanation:

CAPM equation : Expected return = Risk free rate + Beta x (Expected market return - Risk free rate)

W = 4% + [0.85 x (11% - 4%)] = 9.95%

X = 4% + (0.92 x 7%) = 10.44%

Y = 4% + (1.09 x 7%) = 11.63%

Z = 4% + (1.35 x 7%) = 13.45%

Projects Y and Z have an expected return greater than 11%

b. Projects W and Z should be accepted because its expected return is higher than the IRR

c. Project W would be incorrectly rejected because the expected rate of return is less than the overall cost of capital (i.e. 9.95 is less than 11). But its expected rate of return is greater than the IRR

Y would be incorrectly accepted because its expected rate of return is greater than the overall cost of capital but its expected rate of return is less than the IRR

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There is an inverse relationship between bonds' quality ratings and their required rates of return. Thus, the required return is

beks73 [17]

Answer:

The statement is true.

Explanation:

The investor aversion to risk must be compensated with an increased return to make it more feasible.

If all bonds' return were the same then, investor will not invest on high risk bonds.

Company's will not issue the bond to yield higher than they can pay nor higher if they can do it the same as AAA. They do it as the only way to attract investment to his business.

6 0

3 years ago

Puvo, Inc., manufactures a single product in which variable manufacturing overhead is assigned on the basis of standard direct l

gizmo_the_mogwai [7]

Answer:

Manufacturing overhead rate variance= $5,404 favorable

Explanation:

Giving the following information:

Variable manufacturing overhead 0.5 hours $4.00 per hour

During March, 2,800 direct labor-hours were worked.

Variable manufacturing overhead costs during March totaled $5,800.

To calculate the variable overhead rate variance, we need to use the following formula:

Manufacturing overhead rate variance= (standard rate - actual rate)* actual quantity

Actual rate= 5,800/2,800= $2.07

Manufacturing overhead rate variance= (4 - 2.07)*2,800

Manufacturing overhead rate variance= $5,404 favorable

8 0

3 years ago

Paid rent of Rs.25000 by cheque. make journal entry

bezimeni [28]

Answer:

see below

Explanation:

Rent is an expense to the business. An increase in expenses is debited.

rent was paid by cheque. The transaction will reduce money held at the bank( asset) by Rs. 25,000. A reduction in assets is credited.

The journal entry will be

Rent A/c Dr. Rs. 25,000

Bank A/c Cr. Rs. 25,000

8 0

3 years ago

Which of the following contributed to the financial crisis of 2008?

yarga [219]

All of the above given options contributed to the financial crisis of 2008.

Option D

<h3><u>Explanation:</u> </h3>

The 2008 financial crisis has been cumulative of many factors which started in early 2000. Over the period of time from 2000-2008, the government sought to reduce federal funds rates increasing liquidity. The interest rates started increasing and the real estate market was at its saturation point, furthermore, there was also a subprime crisis in terms of loans and mortgages which negatively affected the market.

2008 recession was the climax of all the bad financial decisions that prevailed for many years prior. However, the recession was a global problem and many governments sought to reduce rates, purchased distressed assets and also sought to the nationalization of some financial institutions.

5 0

3 years ago

b. Merchandise purchases were $53,000 and $86,000 for March and April, respectively. Typically, 20% of total purchases are paid

Evgen [1.6K]

Answer:

$58,740

Explanation:

The computation of the cash paid is shown below:

For March month

= March purchase × remaining percentage

= $53,000 × 80%

= $42,400

For April month

= April purchase × given percentage × after applying cash discount

= $86,000 × 20% × 95%

= $16,340

So, the total amount of cash paid would be

= $42,400 + $16,340

= $58,740

Simply we multiply the monthly percentage with their percentage criteria

6 0

4 years ago