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Phantasy [73]
3 years ago
10

"Davcher, Inc. is considering a project for next year, which will cost $5 million. Davcher plans to use the following combinatio

n of debt and equity to finance the investment. Issue $1.5 million of 10-year bonds at a price of 101, with a coupon/contract rate of 4%, and flotation costs of 2% of par. Use $3.5 million of funds generated from retained earnings. The equity market is expected to earn 8%. U.S. Treasury bonds are currently yielding 3%. The beta coefficient for Davcher, Inc. is estimated to be .70. Davcher is subject to an effective corporate income tax rate of 30 percent. (8 points) " Compute Davcher's expected rate of return using the Capital Asset Pricing Model (CAPM).
Business
1 answer:
AfilCa [17]3 years ago
6 0

Based on the U.S. Treasury bond rate, the market return and the beta, Davcher's expected rate of return would be 6.5%.

<h3>What is the expected rate of return?</h3>

Using the Capital Asset Pricing Model (CAPM), the expected rate of return would be:

= Risk free rate + Beta x Market premium

Market premium:

= Market return - risk free rate

= 8% - 3% rate of treasury bonds

= 5%

Expected rate of return is:

= 3% + 0.70 x 5%

= 6.5%

Find out more on the Capital Asset Pricing Model at brainly.com/question/15851284.

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Recording the Early Retirement of a Bond Issued at a Premium (with Premium Account) LO10-7 Several years ago, Cyclop Company iss
Vanyuwa [196]

Answer:

Date   Account Titles and Explanation        Debit            Credit

           Bonds payable                              $1,000,000

           Loss on retirement of bond          $13,000

           [$1,050,000 - $1,037,000]

           Premium on bond                          $37,000

                    Cash (1,000,000*105%)                                $1,050,000

(Record the retirement of the bonds, using a premium account)

3 0
3 years ago
Which of the following outcomes of providing accounting information is an attempt to identify individual securities that are mis
velikii [3]

Answer:

The correct answer is: b. Fundamental analysis.

Explanation:

Fundamental analysis can be understood as a commonly used method that aid to evaluate and analyze the intrinsic value of a specific asset and the evaluation of its evolution and modification of said value across time.

<u>It is a thorough review of all the available financial information while being aware of the effects that external events and influences have on particular asset value. </u>

In conclusion, to the question Which of the following outcomes of providing accounting information is an attempt to identify individual securities that are mispriced by reviewing all available financial information? The correct answer is: b. Fundamental Analysis.

5 0
4 years ago
Joetz Corporation has gathered the following data on a proposed investment project (Ignore income taxes.): Investment required i
dimulka [17.4K]

Answer:

16.7%

Explanation:

The simple rate of return is the annual net income divided by the initial investment in the proposed investment project.

The annual net income is the annual cash flow of $8,400 minus annual depreciation charge.

annual depreciation=cost -salvage value/useful life=($36,000-$0)/15=$2400

annual net income=$8,400-$2,400=$6000

simple rate of return =annual net income/initial investment

initial investment is $36,000

simple rate of return=$6,000/$36,000=16.7%

The second option,16,7% is the correct answer

8 0
4 years ago
what are some attitudes and behaviors that might make it difficult for a foreign-based company to do business in the United Stat
Sunny_sXe [5.5K]

Answer:

  • A high level of Uncertainty in decision making process
  • Non compliance with regulators
  • Unpunctuality

Explanation

  • A high level of Uncertainty in decision making process: In the US business practices the chains for decision making are well known so it will be a disadvantage for a business not to have clear roles and authorities for decision making.
  • Non compliance with regulators: regulators ensure that the best practices are used in any given sector of the economy. Then, if there are too many gaps to reach the level required by regulators it will be a disadvantage for foreign businesses
  • Unpunctuality: there is an strong level of commitment regarding when the products or services must be deliver failing to have a time oriented culture in the process developed by a form will be a weakness for any foreign company
4 0
4 years ago
Jenna Parker owns and manages her single-member LLC, which provides a wide variety of financial services to her clients. She is
tatiyna

Answer:

$57,000

Explanation:

Net Income reported = $300,000

W-2 Wages = $120,000

Assets with an adjusted basis = $75,000

Taxable income before QBI deduction = $285,000

Total taxable income from all source deduction(including standard deduction) = $1,200 for singles & $24,000 for married filling jointly

<u>Calculation of QBI deduction for 2020</u>

The maximum possible pass through deduction = 20% * $285,000 = $57,000

Hence, the income is not over $415,000. So he doesnt qualify for the W-2 wages deduction.

7 0
3 years ago
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