Answer:
Beta= 1.195
Explanation:
Giving the following information:
Stock Investment Beta
A $150,000 1.40
B $10,000 0.80
C $140,000 1.00
D $75,000 1.20
Total $375,000
<u>First, we need to calculate the proportion of investment of each stock:</u>
A= 150,000/375,000= 0.40
B= 10,000/375,000= 0.027
C= 140,000/375,000= 0.373
D= 75,000/375,000= 0.2
<u>Now, to calculate the beta of the portfolio, we need to use the following formula:</u>
Beta= (proportion of investment A*beta A) + (proportion of investment B*beta B)... etc
Beta= (0.4*1.4) + (0.027*0.8) + (0.373*1) + (0.2*1.2)
Beta= 1.195
If you look at the information in the question, you'll notice that the return is less than the cost of borrowing (loan interest rate) (ATIRR). This indicates that there is negative leverage and that the property cannot utilise it.
Positive leverage would be created in the first year if the property was purchased with expected returns equivalent to leverage.
Financial leverage is the process of using borrowed money (debt) to buy assets in the expectation that the income from the new asset or capital gain would outweigh the cost of borrowing. The leverage is summed up in this idea. By using debt (loan money), or leverage, we mean to increase the profits on an investment or project.
Leverage allows investors to increase their market buying power.
Leverage is a tool used by businesses to finance their assets. Rather than issuing stock to raise money, businesses can use debt to finance operations in an effort to boost shareholder value.
The most popular financial leverage ratios to determine how hazardous a company's position is are debt-to-assets and debt-to-equity.
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Answer:
margin of safety= 50%
Explanation:
Giving the following information:
Selling price per unit, $42.
Unit variable expenses, $14.
Total fixed expenses, $42,000
Actual sales for June, 3,000 units.
The formula for the margin of safety is:
Margin of safety= [(current sales level - break-even point)/current sales level]*100
First, we need to calculate the break-even point
break-even point= fixed costs / contribution margin
break-even point= 42000/(42-14)= 1500 units
margin of safety= (3000 - 1500/3000)*100= 50%
Answer:
A) -$10,020,000
Explanation:
Year 0 cash flow = -(Cost of Machine + Installation Cost + Clean Room Cost)
Year 0 cash flow = -($7,000,000 + $20,000 + $3,000,000)
Year 0 cash flow = -$10,200,000
So, the incremental free cash flows associated with the new machine in year 0 is ($10,200,000).
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