1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
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

You might be interested in
Who is the son of the actress who played the mother-in-law of the “Sex and the City” character who graduated Harvard?
irinina [24]
Miranda Hobbes is the mother in law who graduated from harvard, she’s now a lawyer
7 0
3 years ago
What advice does Jessica Cervantes give to teen entrepreneurs who are just starting out? (Site 1).
Aleonysh [2.5K]

Jessica Cervantes is a renowned entrepreneur and business women who advises the new entrepreneurs who are just starting to enter this zone.

<h3>Advice of Jessica Cervantes</h3>

Jessica Cervantes says that new entrepreneurs should have faith in themselves , and this faith and believe must reflect in their products.

She also advised to use all the resources and to reach out to the other entrepreneurs seeking help and advice.

Therefore, Jessica Cervantes motivated and advised the new entrepreneurs who just entered in the field of entrepreneurship.

Learn more about Jessica Cervantes here:

brainly.com/question/9508949

7 0
3 years ago
A JIT system uses kanban cards to authorize movement of incoming parts. In one portion of the system, a work center uses an aver
ycow [4]

Answer: 4 containers

Explanation:

The formula used to get the number of containers that are needed will be:

N = DT(1+X)/C

where,

N = total containers

D = planned usage rate used by the work center = 111 parts per hour

T = average waiting time = 100 minutes = 100/60 hours = 1.67 hours

X = inefficiency factor = 0.21

C = capacity of standard container = 5 dozens = 5 × 12 = 60 parts

N = DT(1+X)/C

N = (111 × 1.67)(1 + 0.21)/60

N = (185.37 × 1.21)/60

N = 224.2977/60

N = 3.738

N = 4 approximately

4 containers will be needed

4 0
3 years ago
Costs that change directly with the level of production are referred to as ________ costs
Elodia [21]
The answer to this question is Variable cost.
As the level of production increase , the total variable cost is increased and vice versa.
Examples of variable cost are the cost of sugar in condensed milk factory, the cost of leather in bag manufacturing, the cost of coffee beans in starbucks, etc.
6 0
3 years ago
illustrate the process needed in the three economic sectors to have the final product being a teddy bear
Zina [86]
Which make easier the measurement of economic activity in the three ..... the strategy used by firms that have as many different product
3 0
3 years ago
Other questions:
  • You are a consultant to a large manufacturing corporation considering a project with the following net after-tax cash flows (in
    13·1 answer
  • You place $4,00.00 in a bank account with an interest rate of 5.25% APR and another $2,000.00 in account with an interest rate o
    7·1 answer
  • Brilliant Accents Company manufactures and sells three styles of kitchen faucets: Brass, Chrome, and White. Production takes 25,
    7·1 answer
  • Jobs in the hidden job market can be discovered through job advertisements t or f
    9·2 answers
  • ________________analysis involves determining the appropriateness of training, given the company's business strategy, its resour
    9·1 answer
  • 5b. MousePad Computer Company, in addition to its retail sales, conducts night classes in computer technology. MousePad has prov
    13·1 answer
  • Asset retirement obligations:
    7·1 answer
  • Presented below is information for Wildhorse Co. for the month of January 2017 Cost of goods sold Freight-out Insurance expense
    12·1 answer
  • PLS HELP!!!!!! WILL GIVE BRAILIEST!! :) Thanks! :) In a biometrics research lab, Grant is listed as the laboratory director, whi
    8·1 answer
  • If there is a high demand for a product, then production will be__.
    9·2 answers
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!