Answer:
a. 16.00%
b. $13.50
Explanation:
a. The computation of the required return is shown below:
Expected rate of return = Risk-free rate of return + Beta × (Market rate of return - Risk-free rate of return)
= 4% + 1.5 × (12% - 4%)
= 4% + 1.5 × 8%
= 4% + 12
= 16.00%
b. Now the stock price is
= Current year dividend ÷ (Required rate of return - growth rate)
= ($1 × 1.08) ÷ (16% - 8%)
= 1.08 ÷ 8%
= $13.50
We simply applied the above formulas
As the manager you may do Social responsibility campaigns such as giving back to the community, hiring community members and donating to the needy, this will make the business to have a good imagine
The method that Stefano’s group used in presenting its recommendations is A SYMPOSIUM. A symposium is basically a public presentation in which a number of people present prepared speeches on different aspects of the same topic; this was exactly what Stefano’s group decided to do in presenting their policy for increasing child safety in the homes of gun owners.
Answer:
a. $11
b. $35
c. If the transferring division does not have excess capacity,this would mean that some units that could have been sold externally would be transferred internally and this creates an opportunity cost. Opportunity costs increase the transfer price.However no opportunity cost exist if transferring division has excess capacity and hence a lower transfer price.
Explanation:
The minimum acceptable price is the price that is acceptable to the transferring division and out of a range of acceptable prices, it is that which would be the best for the company.
When there is excess capacity.
Note : No opportunity costs would exist.
Minimum acceptable price = Variable Cost - Internal Savings + Opportunity Cost
= $11
When there is excess capacity.
Note : Opportunity costs would exist.
Minimum acceptable price = Variable Cost - Internal Savings + Opportunity Cost
= $11 + ($35 - $11 )
= $35
Why Capacity of transferring division (Small Motor Division) has an effect on the transfer price.
If the transferring division does not have excess capacity,this would mean that some units that could have been sold externally would be transferred internally and this creates an opportunity cost. Opportunity costs increase the transfer price.However no opportunity cost exist if transferring division has excess capacity and hence a lower transfer price.
Answer:
$922.69
Explanation:
The price of the 3-year bond can be computed using the below bond price formula:
Price=face value/(1+r)^n+coupon*(1-(1+r)^-n)/r
face value is $1000
r is the new interest rate of 8%
n is the number of annual coupons the bond would pay which is 3
coupon=face value*coupon rate=$1000*5%=$50
price=1000/(1+8%)^3+50*(1-(1+8%)^-3)/8%
price of 3-year bond=$922.69
