Which questions about risk should someone ask before making a big purchase? Check all that apply.

Business

2 answers:

Diano4ka-milaya [45]2 years ago

8 0

The questions to be answered before making a purchase are the following;

<span>· </span>What problems are most likely to happen? – an individual should think of the problems that may arise based on his or her decisions

<span>· </span>What could go wrong? – the individual should not only be concerned with the purchase but what might happen after

<span>· </span>What problems could be most damaging? – choices are made available and to think about in order to think whether your choices could cause problems or harm

Alexeev081 [22]2 years ago

4 0

1. what problems are most likely to happen?

3. what could go wrong?

4. what problems could be most damaging?

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Assume that your firm consists of Division 1 (40 percent of the firm) and Division 2 (60 percent of the firm). The capital struc

tresset_1 [31]

Answer:

Division 1's WACC - Division 2's WACC = 11.752% - 14.6656% = - 1.9136% or Division 1 has the lower cost of capital of 1.9136% in absolute term comparing to Division 2.

Explanation:

Before starting, we need to convert unlevered beta into levered beta:

Levered beta of Division 1: 1.2 x ( 1 + (1-40%) x 0.25) = 1.38

Leverage beta of Division 2: 1.46 x ( 1+ (1-40%) x 0.25) = 1.679

Then, we start step by step as below:

First, using the CAPM model: Cost of equity = risk-free rate of return + beta *(Market Rate of Return – Risk-free Rate of Return) , we find the cost of equity for Division 1 and Division 2.

- Division 1's cost of Equity = 4% + 1.38 x( 12% -4%) = 15.04%

- Division 2's cost of equity = 4% + 1.46 x (12% - 4%) = 17.432%

Second, determine the post-tax cost of debt applied for both Division: 6% x (1-tax rate) = 6% x (1 -40%) = 3.60%

Third, calculate the WACC for each Division:

- Division 1's WACC = % of debt in capital structure x cost of debt + % of equity in capital structure x cost of equity = 20% x 3.6% + 80% x 15.04% = 11.752%;

- Division 2's WACC = % of debt in capital structure x cost of debt + % of equity in capital structure x cost of equity = 20% x 3.6% + 80% x 17.432% = 14.6656%;

Finally, compare the WACC between the two Division:

Division 1's WACC - Division 2's WACC = 11.752% - 14.6656% = - 1.9136% or Division 1 has the lower cost of capital of 1.9136% in absolute term comparing to Division 2.

6 0

2 years ago

Read 2 more answers

Belinda is in charge of both accounting and investments and all of the employees involved with these functions at her firm. Beli

Andrej [43]

Belinda is in charge of both accounting and investments and all of the employees involved with these functions at her firm. Belinda is "Financial Manager".

<h3>Who is financial manager?</h3>

Financial manager examine financial information compiled by accountants, keep track of the company's financial situation, and create and carry out financial strategies.

The roles of financial manager are-