Answer:
11.99%
Explanation:
For computing the estimation of cost of equity, first we have to determine the cost of equity based on CAPM which is shown below:
In this question, we apply the Capital Asset Pricing Model (CAPM) formula which is shown below
Expected rate of return = Risk-free rate of return + Beta × (Market rate of return - Risk-free rate of return)
= 5% + 1.1 × 7%
= 5% + 7.7%
= 12.7%
The (Market rate of return - Risk-free rate of return) is also known as market risk premium and the same is shown in the computation part.
Now the cost of equity based on growth rate which is shown below:
= Current year dividend ÷ price + Growth rate
where,
The current dividend would be
= $1.40 + $1.40× 7%
= $1.40 + $0.098
= $1.498
The other things would remain the same
So, the cost of common equity would be
= $1.498 ÷ $35 + 7%
= 0.0428 + 0.07
= 11.28%
Now the best estimation would be
= (12.7% + 11.28%) ÷ 2
= 11.99%
Answer:
If discontinued, then their operating income will decrease by 168,800
It is a better deal to continue the backpack division active.
Explanation:
sales 960,000
variable cost (475,000)
contribution 485,000
fixed cost (527,000)
loss (42,000)
if Dropped
40% of fixed cost are unavoidable
527,000 x 40% = (210,800)
Difference: 42,000-210,800 = (168,800)
E marketplace can take two different formats, which are Independent trading communities and private exchange.
Usually, the transaction in independent trading communities will be easily visible by others while private exchange tend to be more secretive
hope this helps
Answer: <u>Beating rivals on product attributes while offering a better price </u>is your answer.
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Hope this helped!
