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Simora [160]
3 years ago
8

The common stock of ABC, Inc., has a beta of 1.13 and a standard deviation of 21.4 percent. The market rate of return is 12.7 pe

rcent and the risk-free rate is 4.1 percent. What is the cost of equity for this firm
Business
1 answer:
harina [27]3 years ago
7 0

Answer:

The appropriate answer is "13.82%".

Explanation:

Given:

Risk free rate,

R_f=4.10

Beta of stock,

\beta=1.13

Market rate,

= 12.7

Now,

The market risk premium will be:

⇒ R_p = Market \ rate-Risk \ free \ rate

        = 12.7-4.1

        = 8.60 (%)

hence,

The cost of equity will be:

⇒ r=R_f+\beta\times R_p

      =4.10+1.13\times 8.60

      =4.10+ 9.718

      =13.82 (%)

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Solve the problem using 6.2%, up to $128,400 for Social Security tax and using 1.45%, no wage limit, for Medicare tax.
bekas [8.4K]

$3878.55

Explanation:

Step 1 :

It is given that Kristy has a biweekly gross earnings of $1950.

Since it is bi-weekly payments there are 26 payments in the year.

Gross earnings per year = 1950 * 26 = $50,700

Step 2 :

It is given that the social security tax is 6.2% up to $128,400. Kristy's earnings of 50,700$ does not exceed the threshold $128,400, hence 6.2% of her entire income is subject to social security withholding.

Social security withholding = 6.2% of 50,700 = 6.2*50700/100 = $3143.40

Step 3 :

It is given that Medicare tax is 1.45% with no wage limit

Medicare withholding = 1.45% of 50,700 = 1.45*50700/100 = $735.15

Total withholding = Social Security withholding + Medicare withholding 3143.40 + 735.15 = $3878.55

7 0
4 years ago
Suppose the demand function for good X is given by:
fiasKO [112]

Answer:

Explanation:

Q(8) =15 - 0.5 x 10 - 0.8 x 8 = 15-5-6.4=3.6

Q(10) =15 - 0.5 x 10 - 0.8 x 10 =15-5-8= 2

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7 0
3 years ago
Which of the following statements is CORRECT?
Leya [2.2K]

Answer: C. The beta coefficient of a stock is normally found by regressing past returns on a stock against past market returns. One could also construct a scatter diagram of returns on the stock versus those on the market, estimate the slope of the line of best fit, and use it as beta. However, this historical beta may differ from the beta that exists in the future.

Explanation:

The beta coefficient is used by an economic entity to measure how volatile an individual stock is when such stock is being compared to the market's systematic risk.

Of the options given in the question, the correct answer is option C which states that "C. The beta coefficient of a stock is normally found by regressing past returns on a stock against past market returns. One could also construct a scatter diagram of returns on the stock versus those on the market, estimate the slope of the line of best fit, and use it as beta. However, this historical beta may differ from the beta that exists in the future"

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3 years ago
Which of the following is an essential part of being an entrepreneur?
Molodets [167]

Answer:

B. Taking risks.

Explanation:

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4 years ago
High-performance teams are characterized by: members with only individual accountability. members with specialty skills rather t
Soloha48 [4]

Answer:

extensive communication mechanisms.

Explanation:

High-performance teams is a term often used in organizational settings to describes teams that often performed better than other teams and beyond expectation. They are associated with various characteristics amongst others which are:

1. Presence of extensive communication mechanisms

2. Constant collaboration among team members

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4. Ability to tackle and resolve conflict amicably with speed.

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