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Dmitriy789 [7]
3 years ago
7

The risk-free rate of return is 3% while the market rate of return is 12%. Delta Company has a historical beta of .85. Today, th

e beta for Delta Company was adjusted to reflect internal changes in the structure of the company. The new beta is 1.15. What is the amount of the change in the expected rate of return for Delta Company based on this revision to beta?
Business
1 answer:
Anton [14]3 years ago
4 0

Answer:

2.7%

Explanation:

Calculation for the amount of the change in the expected rate of return for Delta Company based on this revision to beta

First step is to calculate the Expected rate of return for Delta Company stock before adjustment

Expected rate of return for Delta Company stock before adjustment =3+.85(12-3)

Expected rate of return for Delta Company stock before adjustment =3+.85(9)

Expected rate of return for Delta Company stock before adjustment =3+7.65

Expected rate of return for Delta Company stock before adjustment=10.65%

Second step is to calculate the Revised expected return with new beta

Revised expected return with new beta = 3 + 1.15( 12 - 3)

Revised expected return with new beta=3+1.15(9)

Revised expected return with new beta=3+10.35

Revised expected return with new beta=13.35%

Last step is to calculate the Amount of change in the expected rate of return

Using this formula

Amount of change in the expected rate of return=Revised expected return with new beta-Expected rate of return for Delta Company stock before adjustment

Let plug in the formula

Amount of change in the expected rate of return = 13.35% - 10.65%

Amount of change in the expected rate of return=2.7%

Therefore the amount of the change in the expected rate of return for Delta Company based on this revision to beta will be 2.7%

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marshall27 [118]

Answer:

The remaining useful life of the asset is = 10 - 3 = 7 years

Explanation:

The straight line method of depreciation charges a constant depreciation expense through out the useful life of the asset. The formula for depreciation expense under this method is,

Depreciation expense = (Cost - Salvage value) / Estimated useful life of the asset

Plugging in the values for depreciation expense per year, cost and salvage value, we can calculate the total expected life of the asset.

5000 = (53000 - 3000) / estimated useful life of the asset

estimated useful life of the asset = 50000 / 5000

estimated useful life of the asset = 10 years

As the accumulated depreciation  balance is of 15000, the depreciation for 15000/5000 = 3years has been charged.

The remaining useful life of the asset is = 10 - 3 = 7 years

3 0
3 years ago
Horton Company purchased a building on January 2 by signing a long-term $480,000 mortgage with monthly payments of $4,500. The m
Ganezh [65]

Answer:

$479,500

Explanation:

To determine the interest due for the first payment we can solve the following:

interest due on payment 1 = total debt x interest rate x 1/12 = $480,000 x 10% x 1/12 = $4,000

Now we need to subtract the interest due from the first payment:

principal paid = payment - interest due = $4,500 - $4,000 = $500

remaining principal = $480,000 - $500 =  $479,500

8 0
3 years ago
(I don't need this answered, I just wanted to put the correct answers out there for other users)
Ronch [10]

Answer:

1 with c

2 with b

3 with a

Explanation:

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7 0
3 years ago
how much money must you invest now at 4.7​% interest compounded continuously in order to have​ $10,000 at the end of 4 ​years?
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Explanation:

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4 0
3 years ago
Internal control does not consist of policies and procedures that
kotegsom [21]

Answer:

d.guarantee the company will earn a profit

Explanation:

Internal controls are controls put in place by management to mitigate against identified risk. Risk basically  refers to what could go wring in a process. Controls are put in place to mitigate against the risk of error or fraud and do not necessarily prevent the company from making a loss.

Companies make profit or loss based on management's decisions such as where to invest, what time to invest, introduction of a new product, management of cost of sales and operating expenses etc

Internal controls basically consist of policies and procedures that ensure that the company's asset are not misused (fraud), no misrepresentation of revenue (fraud), employees and managers comply with laws and regulations,  business information is accurate ( no misrepresentation of records due to error) etc.

Hence Internal control does not consist of policies and procedures that guarantee the company will earn a profit.

The right option is d.

4 0
3 years ago
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