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Phantasy [73]
2 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]2 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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Answer: 1. No.

2. Yes.

Explanation:

Price Discrimination is a pricing strategy where suppliers/producers or sellers sell a good to different people at different prices depending largely on their preference and/or capacity to pay for the commodity i.e, if you want it more, you are charged more.

1. Johnny did not like to play Hopscotch, so offering Suzie one day of Hopscotch for two days of bug hunting is fair and no price discrimination occured as he did not offer these terms to someone else who's game he did not like.

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Answer:

benefit of staying relevant within the market

Explanation:

Based on the information provided within the question it can be said that this perspective that the Company has taken gives them the benefit of staying relevant within the market. This is because by providing gamers with new and great products, they are giving them exactly what they want which will in term increase sales/profits for the company as well as attention from potential customers.

If you have any more questions feel free to ask away at Brainly.

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On November 1, 2021, Aviation Training Corp. borrows $51,000 cash from Community Savings and Loan. Aviation Training signs a thr
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Answer:

1. November 01,2021

Dr Cash 51000

Cr Notes Payable 51000

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Cr Interest Payable 510

3. February 01,2022

Dr Interest expense 510

Dr Interest Payable 255

Dr Notes Payable 51000

Cr Cash 51,765

Explanation:

Preparation of to record the necessary entries

1. November 01,2021

Dr Cash 51000

Cr Notes Payable 51000

(Being to Record the issuance of note)

2. December 31,2021

Dr Interest expense 510

(51,000*6%*2/12)

Cr Interest Payable 510

(Being to record the adjustment for interest)

3. February 01,2022

Dr Interest expense 510

Dr Interest Payable 255

(51,000*6%*1/12)

Dr Notes Payable 51000

Cr Cash 51,765

(510+255+51000)

(Being to Record the repayment of the note at maturity)

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