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tiny-mole [99]
3 years ago
10

You are considering acquiring a firm that you believe can generate expected cash flows of $10,000 a year forever. However, you r

ecognize that those cash flows are uncertain. a. Suppose you believe that the beta of the firm is 0.4. How much is the firm worth if the risk-free rate is 4% and the expected rate of return on the market portfolio is 11%
Business
1 answer:
Alecsey [184]3 years ago
6 0

Answer:

PV or value of the firm = $147058.8235

Explanation:

To calculate the worth of the firm, we first need to determine the required rate of return of this firm. Using the CAPM equation, we calculate the required rate of return to be,

r = rRF + Beta * (rM - rRF)

Where,

  • rRF is the risk free rate
  • rM is the return on market

r = 0.04 + 0.4 * (0.11 - 0.04)

r = 0.068 or 6.8%

As the firm is expected to generate a constant cash flow forever, it can be treated as a perpetuity. To calculate the value of the firm, we use the present value of perpetuity. The formula for present value of perpetuity is,

PV = Cash flow / r

Where,

  • r is the required rate of return

PV or value of the firm = 10000 / 0.068

PV or value of the firm = $147058.8235

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Ludmilka [50]

Answer:

The correct answer is the option B: Activity B.

Explanation:

First of all, the term <em>''bottleneck''</em> in the management area refers to the activity or process in a chain of processes that its limited capacity reduces the capacity of the chain in its whole.

Once said that, in the case presented, where there are four workers and two of them have to do two differents tasks then the activity consider the bottleneck of the process will be the one in where one person does an activity after another and that reason makes that person delates more in working. That is the case of the activity B, where Aaron has to work again after the first activity and that takes him and Betty five minutes full, while in the other case where Betty works with David they only take four minutes, so therefore that the activity B is the bottleneck of the process.

6 0
3 years ago
A linear production possibilities curve indicates which of the following?
lilavasa [31]

Answer:

I think ur answers are A, B, and C.

Explanation:

Hope this helps!

6 0
2 years ago
In early July, Damon Rutton purchased a $70 ticket to the December 15 game of the Sarasota Shippers. Parking for the game was ex
Bingel [31]

Answer:

Sunk cost will be = $70

Explanation:

Sunk Cost refers to the cost for which the amount has been already spent, and cannot be recovered. These are generally incurred and then not regarded for decision making as irrespective of decision being viable or not this cost cannot be avoided.

In the given instance, Damon Rutton Purchased the ticket of $70

This is the only cost which has already been incurred, else other costs of parking and food will only be incurred if he visits the game of Sarasota Shippers.

When he spend some time with his wife sunk cost will be = $70

8 0
3 years ago
Assume that at the end of the next year, Company A will pay a $2.00 dividend per share, an increase from the current dividend of
Bezzdna [24]

Answer:

The  value of the stock is $28.57

Explanation:

Data provided in the question:

Dividend paid at the end of the year, D1 = $2.00 per share

Increase in dividend = $1.50 per share

Growth rate, g = 5% = 0.05

Required rate of return = 12% = 0.12

Now,

Price with constant Dividend Growth model = D1 ÷ ( r - g )

= $2 ÷ ( 0.12 - 0.05 )

= $28.57

Hence,

The  value of the stock is $28.57

4 0
3 years ago
For the past 16 months, Susie has been paying $126.50 each month to her insurance company. After causing an accident last month,
NeTakaya
Should be a $225 increase for her annual premium.
5 0
3 years ago
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