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murzikaleks [220]
2 years ago
6

According to the bond-yield-plus-risk-premium approach, a firm's cost of retained earnings, r s , can be estimated by adding a r

isk premium of 3 to 5 percentage points to its _____.
Business
1 answer:
Masja [62]2 years ago
7 0

The approach suggest that a firm's cost of retained earnings can be estimated by adding a risk premium of 3% to 5% points to the before-tax interest rate on the firm's own long-term debt.

The bond-yield-plus-risk-premium approach does assumes that cost of equity is closely related to the firm's cost of debt.

  • The premium approach does help to determine the value of an assetof a company's such as its traded equity.

However, the approach suggest that a firm's cost of retained earnings can be estimated by adding a risk premium of 3% to 5% points to the before-tax interest rate on the firm's own long-term debt.

Read more about the premium approach:

<em>brainly.com/question/20354983</em>

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Freeze Ice Cream Shop sells its specialty shakes for $3.50 each. In the summer months, the shop typically sells 200 shakes a day
mamaluj [8]

As a result of the demand increasing only slightly compared to the reduction in price, the demand must be <u>inelastic</u>.

<h3>Why is the demand inelastic?</h3><h3 />

The demand is considered to be inelastic if the price elasticity is less than 1.

The price elasticity is:

= (%Change in quantity/% Change in price)

Solving gives:

= 15 / 200 ÷ 0.50 / 3.50

= -0.525

In conclusion, the demand for the shakes is inelastic.

Find out more on inelastic demand at brainly.com/question/1899986.

5 0
2 years ago
The price elasticity of demand in the United States for crude oil has been estimated to be minus 0.061 in the short run and minu
Anna [14]

Answer: B. is more price elastic in the long run than in the short run because in the long run a substitute for crude oil may be found

Explanation:

The Demand for Crude oil is more elastic in the long run than in the short run because in the long run a substitute for crude oil may be found.

Crude oil is more elastic in the long run because consumers have enough time to find substitute products for crude oil. Price elasticity of demand in the short run  is low because consumers donot have sufficient time to look for substitutes , they donot have much of a choice but to take whatever price is charged by producers of crude oil

3 0
3 years ago
Read 2 more answers
Journalizing issuance of stock—at par and at a premium
suter [353]

Answer:

a.

Cash                                                                           27000 Dr

     Common Stock                                                            13500 Cr

     Paid in capital in excess of par-Common stock         13500 Cr

b.

Cash                                                    135000 Dr

     Preferred Stock                                   135000 Cr

Explanation:

a.

When we issue stock at premium, we always record the amount received from such issuance of stock at full. So, the cash account will be debited for 4500 * 6 = 27000

However, we record the common stock issued at par value and the remaining is credited under the reserve account which is Paid in capital in excess of par.

Thus the common stock will be credited by its par value of 4500 * 3 = 13500 and the remaining 4500 * 3 will be credited to the Paid in Capital account.

b.

The par value of the preferred stock is 4500 * 30 = 135000

Thus the preferred stock is issued at par and we simply debit the cash received from the issue and credit the preferred stock.

4 0
3 years ago
For what reason do you think fitzgerald interrupted gatsby’s story for the visit from the horseback riders? why doesn’t gatsby u
WARRIOR [948]
Fitzgerald wanted his novel to be mysterious. He need not give out all the information because he wanted the readers to be suspenseful regarding the story. Gatsby doesn't understand how he isn't welcome because he's too naive for thinking he is important.
5 0
2 years ago
You are a self-employed profit-maximizing consultant specializing in monopolies. Five firms are currently seeking your advice, a
djverab [1.8K]

Answer:

The answer is option A) The short run recommendation for a monopolistic firm is to remain at the current output level

Explanation:

In the short run, monopolistic firms could record losses but still continue to run in anticipation of a sustainable profit in the long run.

A self-employed profit-maximizing consultant specializing in monopolies understands that the short run losses experienced in a monopoly is also an advantage in that it reduces the participation of more players in the same industry/ market segment.

The best recommendation would be to remain at the current output level during the short run to cut losses, sustain patronage and then develop a long term strategy that will guarantee profitability in the long run.

6 0
3 years ago
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