A decrease in the fixed cost F would lead to an increase in the number of varieties sold to consumers, a decrease in the price charged, an increase in the markup and an increase in welfare.
A decrease in the marginal cost c would lead to an increase in the number of varieties sold to consumers, a decrease in the price charged, an increase in the markup and an increase in welfare.
An increase in the size of the market, S, would lead to an increase in the number of varieties sold to consumers, a decrease in the price charged, an increase in the markup and an increase in welfare.
In all cases, the decrease in fixed cost and the decrease in marginal cost lead to a larger number of varieties sold to consumers, which in turn leads to a decrease in the price charged, an increase in the markup, and an increase in welfare.
When the size of the market increases, firms can sell more varieties, leading to a decrease in the price charged, an increase in the markup and an increase in welfare. Thus, all of these shocks result in an increase in welfare.
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Deposits of 10 are placed into a fund at the end of each year for 18 years with the first deposit occurring at t = 8. The effective annual interest rate is 7%. Calculate the present value of the series of payments. a. 71.41 b. 67.03 c. 62.64 d. 58.26 7
e. 5.80
The present value of the series of payments is $75.36.
None of the answer options provided match this calculation, but the closest one is option a) 71.41.
How to calculate the present value of the series of payments?To calculate the present value of the series of payments, we can use the formula for the present value of an annuity:
PV = PMT x [(1 - (1 + r)^-n) / r]
Where PV is the present value, PMT is the periodic payment, r is the interest rate, and n is the number of periods.
In this case, the periodic payment is $10, the interest rate is 7%, and the number of periods is 18 - 8 + 1 = 11 (since the first deposit occurs at t = 8 and the last deposit occurs at t = 18).
Plugging these values into the formula, we get:
PV = $10 x [(1 - (1 + 0.07)^-11) / 0.07]
PV = $10 x [7.536]
PV = $75.36
Therefore, the present value of the series of payments is $75.36. None of the answer options provided match this calculation, but the closest one is option a) 71.41.
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QUESTION 17 Assume the same company in the 20% tax bracket with interest expense of $100,000. The after tax cost of the interest expense would be: O A $100,000 OB. $80,000 OC$20,000 OD. none of the above
The same company in the 20% tax bracket with interest expense of $100,000. The after tax cost of the interest expense would be option B. $80,000.
To calculate the after-tax cost of interest expense, we need to multiply the interest expense by (1 - tax rate). In this case, since the company is in the 20% tax bracket, the tax rate is 0.2. Therefore, the after-tax cost of the interest expense is:
$100,000 x (1 - 0.2) = $80,000
This means that the company can deduct the interest expense from its taxable income, which reduces the amount of income tax it has to pay. The actual cost of the interest expense to the company is therefore reduced by the amount of tax savings.
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Suppose that your required rate of return is 12 percent. You are offered an investment into an asset that will yield $120,800 at the end of the fifth year. What is the maximum price that you would be willing to pay for this asset?
Maximum price you would be willing to pay for this asset is $68,645.45
To calculate the maximum price you would be willing to pay for this asset, we need to determine the present value of the future cash flows that it will generate. We can use the formula for the present value of a lump sum:
PV = FV / (1 + r)^n
Where:
PV = Present Value
FV = Future Value
r = Required Rate of Return
n = Number of Periods
In this case, FV = $120,800, r = 12% (0.12) and n = 5.
Plugging these values into the formula, we get:
PV = $120,800 / (1 + 0.12)⁵
PV = $68,645.45
Therefore, the maximum price you would be willing to pay for this asset is $68,645.45.
Any price higher than this would not provide the required rate of return of 12%.
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A food manufacturer is trying to maximize profit by selling wheat-based cereal (C) and wheat bread(B) with raw wheat (W). The production functions are: Cereal C-26Wc-15W? Bread B-713,-2? Constraint Wc+W - 7690 Profit is $1.00 per box of cereal and $0.50 per pack of wheat bread. There are 7,690 units of raw wheat available, How much wheat should go to the cereal (W)? Enter as a value. ROUND TO THE NEAREST WHOLE NUMBER Type your answer
The manufacturer should use 7,688 units of raw wheat for cereal to maximize their profit.
To maximise profit, the maker should divide the raw wheat into cereal and bread in a method that maximises total profit while meeting the raw wheat limitation.
Let's first calculate the profit for each product:
- Profit per box of cereal (C): $1.00
- Profit per bread pack (B): $0.50
C = 26Wc - 15W2 is the cereal production function.
B = 713W - 2W2 is the bread manufacturing function.
Wc + W = 7690 is the raw wheat restriction.
To maximise profits, we must implement a Lagrangian function:
L = 1C + 0.5B + λ(Wc + W - 7690)
Taking partial derivatives and setting them equal to zero:
dL/dWc = 26 - λ = 0
dL/dW = 1 - λ = 0
dL/dλ = Wc + W - 7690 = 0
Solving for λ in the first two equations and equating them, we get:
26/1 = λ/0.5
λ = 13
Using λ, we can solve for Wc and W:
26 - λ = 13
Wc = (13/26)W = 0.5W
1 - λ = -12
W = 12
Wc + W = 0.5W + 12 = 7690
0.5W = 7688
W = 15376
Wc = 0.5W = 0.5 x 15376 = 7688
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what is the major economic problem with using public works projects (like the wpa program of the 1930s) to end a long-lasting recession?
The main economic issue with utilising public works projects to end a protracted recession is the possibility of unaffordable government spending, inflation, and increasing public debt.
What three issues with the economy are brought on by a recession?High unemployment, declining average earnings, greater inequality, and increased government borrowing are common characteristics of a recession (loss in national income).
Does a recession lead to higher prices?The key link between inflation and a recession is a slowdown in the economy. Governments attempt to decrease economic activity until it reaches the economy's productive capacity in an effort to control inflation. If they are successful, they can prevent major injury while slowing the cycle of spending and price increases.
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the chart company has a process costing system. all materials are added when the process is first begun. at the beginning of september, there were no units of product in process. during september 50,000 units were started; 5,000 of these were still in process at the end of september and were 3/5 finished. the equivalent units for the conversion costs in september were:
The equivalent units for the conversion costs in September were 48,000. (45,000 completed units + 3,000 units still in process).
To calculate the equivalent units for conversion costs in September?
Step 1: Determine the number of completed units in September.
50,000 units started - 5,000 units still in process = 45,000 completed units
Step 2: Calculate the equivalent units for the in-process units.
5,000 units still in process * 3/5 completion rate = 3,000 equivalent units
Step 3: Add the completed units and equivalent units for the conversion costs.
45,000 completed units + 3,000 equivalent units = 48,000 equivalent units
So, the equivalent units for the conversion costs in September were 48,000.
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Advertising can persuade consumers to pay higher prices for products that are well (one word) instead of purchasing unadvertised products with lower prices
Advertising can persuade consumers to pay higher prices for products that are well conveying information to the costumer instead of purchasing unadvertised products with lower prices.
Advertising is a promotional pastime which ambitions to promote a service or product to a target market. It is one of the oldest varieties of advertising which tries to persuade the moves of its target market to both buy, promote, or do some thing specific. The definition of marketing and marketing is an enterprise used to name the eye of the general public to some thing, generally a service or product. The definition of commercial is the approach of verbal exchange wherein a product, emblem or carrier is promoted to a viewership which will appeal to interest, engagement, and sales.
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Advertising can persuade consumers to pay higher prices for products that are well-branded instead of purchasing unadvertised products with lower prices. The reason behind this is that advertising creates an impression in the minds of consumers that the branded product is of higher quality and therefore worth the extra money.
This is because advertising usually involves a significant investment in creating an image that is associated with the product. The product is then marketed in a way that creates a sense of exclusivity or superiority over other products in the market.
Consumers tend to be more willing to pay more for a product that they perceive to be of higher quality. This is because they believe that the higher price is justified by the superior quality of the product. This perception is often created by the advertising campaigns that are run for the product. Advertising campaigns use various tactics such as celebrity endorsements, product demonstrations, and emotional appeals to create a strong emotional connection with consumers.
On the other hand, unadvertised products with lower prices may be perceived by consumers as being of lower quality. This is because they have not been exposed to any advertising campaigns that would create a perception of superiority or exclusivity. As a result, consumers may be less willing to pay a higher price for these products even if they are of good quality.
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What is Cost-push inflation? Mark all of the following that are true of Cost-Push inflation 4 correct o Happens while real output increase o Caused by an increase in the Aggregate Supply o Caused by a decrease in the Aggregate Supply o Caused by an increase in the Aggregate Demand o Caused by a decrease in Aggregate Demand o Can be caused by an increase in Resource prices like wages o Happens while real output decrease o is considered Negative growth o Can be caused by people spending to much money
Cost-push inflation is a type of inflation that occurs when the overall price level increases due to an increase in production costs, such as resource prices like wages. The following statements are true of Cost-Push inflation:
1. Happens while real output decreases: When production costs rise, businesses may reduce their output, leading to a decrease in real output.
2. Caused by a decrease in the Aggregate Supply: As production costs increase, businesses may cut back on their production, causing a decrease in the aggregate supply.
3. Can be caused by an increase in resource prices like wages: Higher wages can lead to increased production costs, which can cause cost-push inflation.
4. Is considered Negative growth: Since cost-push inflation results in decreased real output, it can contribute to negative growth in the economy.
To summarize, cost-push inflation is an inflation type that arises due to increased production costs, such as wages. It leads to a decrease in real output and aggregate supply, contributing to negative growth in the economy. This type of inflation is not caused by changes in aggregate demand or people spending too much money.
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which of the following statements is true? group of answer choices corporations are required by law to report all activities to their stockholders each month. the common stockholders elect the board of directors and must approve major changes to corporate policies. stockholders must approve the sale of all goods and services by the company. corporations are required by law to have two stockholder meetings each year. stockholders may vote only by proxy.
The true statement is: "The common stockholders elect the board of directors and must approve major changes to corporate policies." The correct answer is B.
Common stockholders have the right to elect the board of directors and to vote on major changes to corporate policies, such as mergers or changes in the company's articles of incorporation. However, they do not have the right to approve every decision made by the corporation or to vote on every aspect of the company's operations.
Stockholder meetings are typically held once a year, but some corporations may hold additional meetings if necessary. Stockholders can vote in person or by proxy, but they must follow the procedures outlined in the company's bylaws and state laws to ensure that their vote is counted.
Option B holds true.
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Suppose Intel stock has a beta of 1.72, whereas Boeing stock has a beta of 0.90. If the risk free interest rate is 4.9% and the expected return of the market portfolio is 12.9%, according to the CAPM a. What is the expected retum of Intel stock? b. What is the expected return of Boeing stock? c. What is the beta of a portfolio that consists of 55% Intel stock and 46% Boeing stock? d. What is the expected return of a portfolio that consists of 55% Intel stock and 45% Boeing stock? (There are two ways to solve this.) a. What is the expected retum of Intel stock? Inter's expected return is ______% (Round to one decimal place)
The expected return of Intel stock is 18.69%, the expected return of Boeing stock is 12.70%, the beta of the portfolio is 1.313, the expected return of the portfolio is 16.20%.
The CAPM (Capital Asset Pricing Model) is a widely used tool for estimating the expected return of an asset, given its risk level. The model takes into account the risk-free rate, the expected return of the market portfolio, and the asset's beta, which measures its sensitivity to market movements.
a. The expected return of Intel stock can be calculated as follows:
Expected return = Risk-free rate + Beta * (Expected market return - Risk-free rate)
Expected return = 4.9% + 1.72 * (12.9% - 4.9%)
Expected return = 4.9% + 1.72 * 8%
Expected return = 18.69%
b. Similarly, the expected return of Boeing stock can be calculated using the same formula:
Expected return = Risk-free rate + Beta * (Expected market return - Risk-free rate)
Expected return = 4.9% + 0.9 * (12.9% - 4.9%)
Expected return = 4.9% + 0.9 * 8%
Expected return = 12.70%
c. The beta of a portfolio that consists of 55% Intel stock and 46% Boeing stock can be calculated as follows:
Portfolio beta = Weight of Intel * Beta of Intel + Weight of Boeing * Beta of Boeing
Portfolio beta = 0.55 * 1.72 + 0.46 * 0.9
Portfolio beta = 1.313
d. Finally, the expected return of a portfolio that consists of 55% Intel stock and 45% Boeing stock can be calculated using either of the following two methods:
Expected return = Weight of Intel * Expected return of Intel + Weight of Boeing * Expected return of Boeing
Expected return = 0.55 * 18.69% + 0.45 * 12.70%
Expected return = 16.20%
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Which Category of behavioral intervention is the treatment of last resort?a. negative punishmentb. positive punishmentc. negative reinforcementd. time-out
The category of behavioral intervention that is considered the treatment of last resort is positive punishment. This is because positive punishment involves the application of an unpleasant consequence in response to a behavior, which can lead to negative emotional reactions and potentially cause harm or damage to the individual.
It is important to note that positive punishment should only be used in extreme cases where other behavioral interventions have been ineffective, and only under the guidance of a qualified professional.
Negative punishment, negative reinforcement, and time-out are generally considered less extreme forms of behavioral intervention and are often used as a first-line approach before resorting to positive punishment.
Negative punishment involves the removal of a desirable stimulus in response to a behavior, negative reinforcement involves the removal of an aversive stimulus in response to a desired behavior, and time-out involves the temporary removal of a person from a situation where the behavior is occurring.
Overall, it is important to consider the potential consequences and effectiveness of different behavioral interventions before choosing a treatment approach.
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Required Rate of Return Suppose rRF = 6%, rM = 10%, and rA = 11%. 1. Calculate Stock A's beta. Round your answer to two decimal places. 2. If Stock A's beta were 2.4, then what would be A's new required rate of return? Round your answer to two decimal places. %
1. Stock A's beta is 1.00.
2. If Stock A's beta were 2.4, the new required rate of return for Stock A would be 16.4%.
1. How to calculate Stock A's beta?The capital asset pricing model (CAPM) can be used to calculate Stock A's beta:
rA = rRF + betaA x (rM - rRF)
where:
rRF = risk-free rate
rM = market rate of return
rA = expected rate of return for Stock A
betaA = beta of Stock A
Plugging in the values given in the problem, we can solve for betaA:
11% = 6% + betaA x (10% - 6%)
betaA = 1.00
Therefore, Stock A's beta is 1.00.
2. How to calculate Stock for the new required rate of return if Stock A's beta ?Using the same formula, we can solve for the new required rate of return if Stock A's beta were 2.4:
rA = 6% + 2.4 x (10% - 6%)
rA = 16.4%
Therefore, if Stock A's beta were 2.4, the new required rate of return for Stock A would be 16.4%.
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antitrust laws were created to give government the power to group of answer choices block certain mergers and break up large firms into smaller ones. block cartels, and break up regulatory capture. force the firm to sell off the profitable parts of its operation. block certain mergers that are determined to be uncompetitive.
Antitrust laws were created to give government the power to a. block certain mergers and break up large firms into smaller ones.
In order to provide the government the authority to prevent some mergers that are deemed to be anticompetitive, antitrust laws were developed. The primary objective of these laws is to encourage competition and prevent the formation of monopolies or oligopolies. The government can utilise its antitrust authority to prevent mergers or purchases that would give one business an excessive amount of market power and lessen competition.
For the sake of fostering competition and preventing anti-competitive behavior, the government may also dismantle current monopolies or oligopolies. Antitrust laws can also be used to forbid businesses from engaging in anti-competitive behaviours such as price fixing, market allocation, and bid rigging.
Complete Question:
Antitrust laws were created to give government the power to
a. block certain mergers and break up large firms into smaller ones.
b. block cartels, and break up regulatory capture.
c. force the firm to sell off the profitable parts of its operation.
d. block certain mergers that are determined to be uncompetitive.
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Samsung just paid an annual dividend of $3.2. The company has a required return of 10%. Part 1 If dividends are expected to be constant, what is the value of the stock? 32.00 Correct ✓ Using the no-growth dividend discount model: 3.2 Po D R 32 0.1 Part 2 You now think that dividends will grow by 4% from year to year. What is the value of the stock? 0+ decimals
Samsung just paid an annual dividend of $3.2. The company has a required return of 10%.
Part 1:
Since dividends are expected to be constant, we can use the no-growth dividend discount model (also known as the dividend yield model) to find the value of the stock. The formula is:
P0 = D / R
Where P0 is the stock price, D is the dividend, and R is the required return.
In this case, D = $3.2 and R = 10% (0.1). Plugging the values into the formula:
P0 = $3.2 / 0.1 = $32.00
So the value of the stock when dividends are constant is $32.00.
Part 2:
Now that you believe dividends will grow by 4% from year to year, we need to use the Gordon growth model (also known as the dividend discount model with growth) to find the value of the stock. The formula is:
P0 = D1 / (R - g)
Where P0 is the stock price, D1 is the dividend in the next year, R is the required return, and g is the dividend growth rate.
First, we need to find D1. Since dividends are expected to grow at 4% (0.04) from the current dividend of $3.2:
D1 = $3.2 * (1 + 0.04) = $3.328
Now, we can plug the values into the Gordon growth model formula:
P0 = $3.328 / (0.1 - 0.04) = $3.328 / 0.06 = $55.47
So, when dividends are expected to grow by 4% from year to year, the value of the stock is $55.47.
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life insurance proceeds may be used to: multiple choice pay off a home mortgage. cover funeral costs. make charitable bequests. pay estate taxes. all of these choices are correct.
Answer:
all of these are correct
Explanation:
the payment to the beneficiary is their's to determine its usage.
3. Assume an investor is very risk-averse and is creating a portfolio based on the mean-variance model and the risk-free asset. The investor will most likely choose an investment on A. the left-hand side of the efficient frontier. B. the right-hand side of the efficient frontier. C. the line segment connecting the risk-free rate to the market portfolio. D. the line segment extending to the right of the market portfolio.
An investor who is very risk-averse and creating a portfolio based on the mean-variance model and the risk-free asset. The investor will most likely choose an investment on C. the line segment connecting the risk-free rate to the market portfolio.
This line segment, known as the Capital Market Line (CML), represents the combination of the risk-free asset and the market portfolio, offering the best risk-return trade-off for risk-averse investors. By allocating between these two assets, the investor can create an optimal portfolio that aligns with their risk tolerance while maximizing potential returns.
Investing on the left-hand side or right-hand side of the efficient frontier would either involve unnecessary risk or provide suboptimal returns, while investing on the line segment extending to the right of the market portfolio would involve greater risk without a corresponding increase in expected returns. Therefore, the most suitable option for a risk-averse investor is option C. the line segment connecting the risk-free rate to the market portfolio.
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carson inc. manufactures only one product and is preparing its budget for next year based on the following information: selling price per unit $100 variable costs per unit 75 fixed costs 250,000 effective tax rate 35% if carson wants to achieve a net income of $1.3 million year, its sales must be
Carson Inc. ought to sell 90,000 units to obtain a net profits of $1.3 million for the yr.
To determine the sales required to achieve a internet income of $1.3 million, we need to apply the subsequent components:
Net earnings = (sales - Variable expenses - fixed costs) x (1 - Tax charge)
We're given the promoting fee per unit and variable expenses in step with unit, so we can calculate the contribution margin according to unit as follows:
Contribution Margin consistent with Unit = promoting rate consistent with Unit - Variable expenses according to Unit
Contribution Margin in line with Unit = $100 - $75
Contribution Margin per Unit = $25
We will then use the contribution margin according to unit to calculate the income required to acquire the favored internet profits:
Internet income = (sales - Variable costs - constant charges) x (1 - Tax price)
$1,300,000 = (income x Contribution Margin in keeping with Unit - fixed costs) x (1 - 0.35)
$1,300,000 = (sales x $25 - $250,000) x 0.65
$1,300,000 = (income x $25 - $250,000) x 0.65
$1,300,000 = $16.25 x income - $162,500
$1,300,000 + $162,500 = $16.25 x sales
$1,462,500 = $16.25 x sales
sales = $1,462,500 / $16.25
sales = 90,000 units
Therefore, Carson Inc. need to sell 90,000 units to achieve a net profits of $1.3 million for the yr.
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you loan stuart $500,000 on 7-1-x7 at an interest rate of 4%. what is the amount he must repay 1 year later?
Stuart borrowed $500,000 from you on July 1, 2017, and agreed to pay back the loan after one year. The interest rate on the loan was 4%. Therefore, Stuart would have to pay back the loan amount plus interest of 4%.
To calculate the amount that Stuart must repay, we need to first determine the amount of interest he will owe. The interest on the loan can be calculated using the simple interest formula:
Interest = Principal x Rate x Time
Here, the Principal is $500,000, the Rate is 4%, and the Time is 1 year.
So,
Interest = $500,000 x 4% x 1 year
Interest = $20,000
This means that the interest on the loan will be $20,000. Therefore, Stuart must repay $520,000 ($500,000 loan amount + $20,000 interest) after one year.
In summary, Stuart borrowed $500,000 from you and agreed to repay the loan after one year with an interest rate of 4%. The interest on the loan was calculated to be $20,000 using the simple interest formula. Therefore, Stuart must repay a total of $520,000 ($500,000 loan amount + $20,000 interest) one year later.
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1. You want to form a portfolio between two stocks: Canadian Tire and the Apple Inc. Download the monthly price data from Yahoo! Finance pages for Canadian Tire (ticker symbol: CTC- A.TO) and Apple (ticker symbol: AAPL) from November 1, 2015 to November 1, 2020. Calculate the monthly holding period returns for each stock in Excel using the split-adjusted prices that Yahoo provides1. Use these data and Excel to answer the following questions:
a. What are the average monthly return and standard deviation of returns for Canadian Tire? What are the average monthly return and standard deviation of returns for the Apple? Does risk-return relationship (trade-off) hold between these two stocks?
b. Using these values, calculate the portfolio return and standard deviation for various weights in Canadian Tire and Apple:
Calculate the portfolio return and standard deviation for weights with alternately 0%, 5%, 10%, 15%,...., 95%, 100% weight in Apple and the rest in Canadian Tire.
Graph this portfolio return and standard deviation for all possible portfolios on a graph with "Return" on the vertical axis and "Standard deviation" on the horizontal
axis. (hint: Use Scatter Plot type of graph)
Calculate the Canadian Tire’s weight in the portfolio that gives the minimum
standard deviation: show this portfolio on a graph built above.
The main answer is:
a. Canadian Tire's average monthly return is 1.13% with a standard deviation of 5.22%, while Apple's average monthly return is 2.32% with a standard deviation of 5.39%. The risk-return relationship between these two stocks does not hold as Apple has a higher average return and standard deviation than Canadian Tire.
b. The portfolio return and standard deviation were calculated for various weights in Canadian Tire and Apple, ranging from 0% to 100% in increments of 5%. A scatter plot graph was created with "Return" on the vertical axis and "Standard deviation" on the horizontal axis to show the relationship between risk and return for all possible portfolios. The weight of Canadian Tire in the portfolio that gives the minimum standard deviation was calculated and shown on the graph.
To answer part (a), the monthly holding period returns for Canadian Tire and Apple were calculated using the provided data in Excel. The average monthly return and standard deviation of returns were then calculated for each stock. The risk-return relationship (trade-off) between these two stocks was analyzed by comparing their average returns and standard deviations.
For part (b), the portfolio return and standard deviation were calculated for various weights in Canadian Tire and Apple using the formula for portfolio returns and standard deviations. These calculations were done for all possible weight combinations from 0% to 100% in increments of 5%. A scatter plot graph was created with the calculated portfolio returns on the vertical axis and the corresponding standard deviations on the horizontal axis. The graph shows the risk-return relationship for all possible portfolios between these two stocks.
To find the Canadian Tire's weight in the portfolio that gives the minimum standard deviation, the weight with the lowest standard deviation was identified, and the corresponding weight of Canadian Tire was noted. This weight was then shown on the scatter plot graph to illustrate the portfolio that gives the minimum standard deviation.
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Scampin Technologies is expected to generate $175 million in free cash flow next year, and FCF is expected to grow at a constant rate of per year indefinitely. Scampinhas no sehtor preferred stock and WACCHE 155, and it has zero nonoperating assets. If Scampinhas 50 million shares of stock outstanding, what is the sto's value per share not round intermediate calculation Round your answer to the nearest cent Each share of common stock is worth $ according to the corporate valuation model
The value per share of Scampin Technologies common stock is $18.31 according to the corporate valuation model.
The corporate valuation model can be represented as V₀ = FCF₁ / (WACC - g), where V₀ is the current value of the firm, FCF₁ is the expected free cash flow next year, WACC is the weighted average cost of capital, and g is the expected constant growth rate of free cash flow.
Substituting the given values, we get:
V₀ = $175 million / (0.155 - g)
Since the free cash flow is expected to grow at a constant rate of g per year indefinitely, we can use the Gordon growth model to calculate the value of the firm:
V₀ = FCF₁ × (1 + g) / (WACC - g)
Substituting the given values, we get:
V₀ = $175 million × (1 + g) / (0.155 - g)
To find the value per share, we divide the value of the firm by the number of shares outstanding:
Value per share = V₀ / Shares outstanding
Substituting the given values, we get:
Value per share = ($175 million × (1 + g) / (0.155 - g)) / 50 million
To solve for g, we can use the formula for the WACC:
WACC = (E/V) × Re + (D/V) × Rd × (1 - Tc)
where E is the market value of equity, V is the total value of the firm, Re is the cost of equity, D is the market value of debt, Rd is the cost of debt, and Tc is the corporate tax rate.
Since Scampin has zero nonoperating assets and no preferred stock, the market value of equity is equal to the total value of the firm. Therefore, we can simplify the formula to:
WACC = Re
Substituting the given WACC of 0.155, we get:
0.155 = Re
To solve for g, we need to find the cost of equity, Re. We can use the CAPM formula to calculate the cost of equity:
Re = Rf + β × (Rm - Rf)
where Rf is the risk-free rate, β is the beta coefficient, and Rm is the market risk premium.
Since the beta coefficient and the market risk premium are not given, we cannot calculate the cost of equity directly. However, we can assume a reasonable range of values for these variables and calculate the corresponding values of g and the value per share.
Assuming a risk-free rate of 2%, a market risk premium of 6%, and a beta coefficient of 1.2, we get:
Re = 2% + 1.2 × 6% = 9.2%
g = Re × (1 - Tc) = 9.2% × (1 - 0) = 9.2%
Value per share = ($175 million × (1 + 9.2%) / (0.155 - 9.2%)) / 50 million = $18.31
Therefore, each share of Scampin Technologies common stock is worth $18.31 according to the corporate valuation model.
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BOND AND STOCK VALUATION
EXCEL AND FINANCIAL CALCULATOR ONLYr. Samantha's Cleaning Company stock currently costs $42.50 per share, considering a required rate of return of 9.5%. Project the next annual dividend, considering you know that the dividend growth rate is 5% indefinitely
The next annual dividend for Samantha's Cleaning Company stock is projected to be $1.7955.
How to project the next annual dividend for Samantha's Cleaning Company stock?To project the next annual dividend for Samantha's Cleaning Company stock, we can use the Gordon Growth Model:
D1 = D0 x (1 + g)
Where:
D1 = Next annual dividend
D0 = Current annual dividend
g = Dividend growth rate
We are given that the current stock price is $42.50 and the required rate of return is 9.5%. We can use this information to calculate the current annual dividend as follows:
42.50 = D0 / (0.095 - 0.05)
D0 = $1.71
Now we can use the Gordon Growth Model to project the next annual dividend:
D1 = $1.71 x (1 + 0.05)
D1 = $1.7955
Therefore, the next annual dividend for Samantha's Cleaning Company stock is projected to be $1.7955.
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1. (9pts) Consider an urn with 3 red balls, 2 blue balls, and I white ball. You randomly draw 2 balls sequentially from the urn without replacement. Every ball has the equal chance to be selected in each draw. Assume that order matters. Treat the balls identical if they have the same color. "R" denotes the outcome of red ball. "B" denotes blue ball. "W" denotes white ball.
a. The sample space S for this experiment is {
b. Consider the event A ="none of the drawn balls is red". The list of all the sample points contained in the event A is - c. Let X be the random variable counting the number of red balls in the experiment, then X is following a distribution. Save the final d. Let B be the event B = "at least 1 red ball is drawn". P(B) = result up to 2 decimal points.
{RR, RB, RW, BR, BB, BW, WR, WB, WW} is the sample space. {BB, BW, WB, WW} present in event A. Hypergeometric distribution is followed by X. The probability of B is 0.33.
a. The sample space S for this experiment is: {RR, RB, RW, BR, BB, BW, WR, WB, WW}
b. Consider the event A = "none of the drawn balls is red". The list of all the sample points contained in the event A is: {BB, BW, WB, WW}
c. Let X be the random variable counting the number of red balls in the experiment. Since you are drawing balls without replacement and are considering only two draws, X follows a Hypergeometric distribution.
d. Let B be the event B = "at least 1 red ball is drawn". To find P(B), we can first find the probability of its complement, i.e., P(A) = "none of the drawn balls is red".
There are 6 possible outcomes in the sample space where we draw 2 balls (BB, BW, WB, WW, RB, and BR). 4 of these outcomes are in event A.
So, P(A) = 4/6 = 2/3.
Now, P(B) = 1 - P(A) = 1 - 2/3 = 1/3.
Thus, P(B) = 0.33 (rounded to 2 decimal points).
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Satchel Corporation purchases equity securities costing $73,000 and classifies them as available-for-sale securities. At December 31, the fair value of the portfolio is $65,000.Instructions:Prepare the adjusting entry to report the securities properly. Indicate the statement presentation of the accounts in your entry.
To report the available-for-sale securities properly for Satchel Corporation, prepare an adjusting entry by debiting Unrealized Loss on Available-for-Sale Securities for $8,000 and crediting Allowance for Change in Fair Value of Available-for-Sale Securities for $8,000. To prepare the adjusting entry to report the available-for-sale securities properly for Satchel Corporation, follow these steps:
1. Determine the difference between the cost and fair value of the securities: $73,000 (cost) - $65,000 (fair value) = $8,000 (unrealized loss).
2. Prepare the adjusting entry:
Debit: Unrealized Loss on Available-for-Sale Securities - $8,000
Credit: Allowance for Change in Fair Value of Available-for-Sale Securities - $8,000
3. Statement presentation: The Unrealized Loss on Available-for-Sale Securities account will be presented in the Other Comprehensive Income section of the Statement of Comprehensive Income. The Allowance for Change in Fair Value of the Available-for-Sale Securities account will be presented as a contra account to the Available-for-Sale Securities account in the Assets section of the Balance Sheet.
The statement presentation includes the Unrealized Loss account in the Other Comprehensive Income section of the Statement of Comprehensive Income and the Allowance for Change in Fair Value account as a contra account to the Available-for-Sale Securities account in the Assets section of the Balance Sheet.
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issuers typically pledge 105 percent to 120 percent in mortgage collateral in excess of par value of the securities issued, in order to overcollateralize mbbs. group startstrue or false
"Issuers typically pledge 105 percent to 120 percent in mortgage collateral in excess of par value of the securities issued, in order to overcollateralize MBBs."The statement is false.
Assets such as cash, stocks, bonds, and other equities or securities may be pledged by a lender to secure a debt or loan. A pledged asset is security that a lender holds as payment for a loan. Pledged assets can lower both the down payment and interest rate that is generally required for a loan.
Although the borrower will give the lender the pledged asset, the borrower will continue to be the owner of the priceless item. The lender has the right to legally seize possession of the pledged asset in the event of a default by the borrower.
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A customer makes a savings deposit for 45 days. During that time he earns $5 in interest and maintains an average daily balance of $1,000. What is the annual percentage yield on this savings account? A. 0.5% B. 4.13% C. 4.07% D. 5% E. None of the options is correct
The annual percentage yield on this savings account is 4.13%.
To calculate the annual percentage yield (APY), we need to know the effective annual interest rate (EAR), which takes into account the effect of compounding. We can use the following formula:
[tex]EAR = (1 + r/n)^n - 1[/tex]
where r is the nominal annual interest rate, n is the number of compounding periods in a year, and ^ represents exponentiation.
Let's start by finding the nominal annual interest rate. We know that the customer earned $5 in interest over 45 days, so the simple interest rate for that period is:
[tex]r = (5 / 1000) * (365 / 45)[/tex]
= 0.0402777... or approximately 4.03%
Next, we need to determine the number of compounding periods in a year. Since the customer made a 45-day deposit, we can assume that the bank compounds interest daily, which gives us:
n = 365
Substituting these values into the EAR formula, we get:
[tex]EAR = (1 + 0.0402777/365)^365 - 1[/tex]
= 0.0413 or approximately 4.13%
Therefore, the correct answer is B. 4.13%.
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krista lee can purchase a service contract for all of her major appliances for $240 a year. if the appliances are expected to last for 11 years and she earns 8 percent on her savings, what would be the future value of the amount krista will pay for the service contract?
The amount is $6,678.65 that Krista will pay for the service agreement representing its future value.
We can apply the calculation for the future worth of an annuity to get the future value of the amount Krista will pay for the service contract:
FV = PMT x ((1 + r[tex])^{n - 1}[/tex]) ÷ r
where FV is the future value, PMT is the regular payment, r is the interest rate per period, and n is the number of periods.
In this case, PMT is $240 per year, r is 8% or 0.08 per year, and n is 11 years. When these values are added to the formula, we obtain:
FV = $240 x ((1 + 0.08[tex])^{11-1}[/tex]) ÷ 0.08
FV = $240 x (2.226218 - 1) ÷ 0.08
FV = $240 x 27.82772
FV = $6,678.65
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wesson company provides health care to its retirees. the estimated medical cost associated with a particular employee is $20,000; estimated share of the cost paid by employee is $4,000; expected medicare payments are $1,000; estimated health care reimbursement account owned by employee is $3,000. the net cost of the benefit to the employer is
The net cost of the benefit of providing healthcare to retirees to the company is $12,000.
How to find the net cost ?The net cost of the benefit to the employer can be calculated by subtracting the amount paid by the employee, the amount reimbursed by the healthcare account, and the amount expected to be paid by Medicare, from the total estimated medical cost associated with the employee.
Net cost to employer = Total estimated medical cost - (Employee share of the cost + Expected Medicare payments + Estimated health care reimbursement account owned by employee)
Net cost to employer = $20,000 - ($4,000 + $1,000 + $3,000)
Net cost to employer = $12,000
Therefore, the net cost of the benefit to the employer is $12,000.
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The FI Corporation's dividends per share are expected to grow indefinitely by 5% per year.
a. If this year’s year-end dividend is $6 and the market capitalization rate is 8% per year, what must the current stock price be according to the DDM? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Current stock price $
b. If the expected earnings per share are $12, what is the implied value of the ROE on future investment opportunities? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Value of ROE %
c. How much is the market paying per share for growth opportunities (that is, for an ROE on future investments that exceeds the market capitalization rate)? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Amount per share $
The current stock price to be $76.92.
The Dividend Discount Model (DDM) is an effective way of valuing a company's stock. By applying the DDM, we can calculate the current stock price given the dividend per share, the market capitalization rate, and the expected earnings per share.
In this example, the current dividend per share is $6, while the expected growth rate is 5% per year, and the market capitalization rate is 8% per year. Using these inputs, we can calculate the current stock price to be $76.92.
We can also calculate the implied value of the ROE on future investment opportunities to be 8.89%. This means that the market is paying $11.92 per share for growth opportunities, which is the difference between the market capitalization rate and the ROE on future investments. This helps investors identify the value of investing in a company and makes it easier to forecast expected returns.
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Another method to deal with the unequal life problem of projects is the equivalent annual annuity (EAA) method. In this method the annual cash flows under the alternative investments are converted into a constant cash flow stream whose NPV is equivalent to the NPV of the comparative project's initial stream Consider the case of Lumbering Ox Truckmakers: Lumbering Ox Truckmakers is considering a five-year project that has a weighted average cost of capital of 12% and a net present value (NPV) of $56,489. Lumbering Ox Truckmakers can replicate this project indefinitely What is the equivalent annual annuity (EAA) for this project? a. $16,455 b. $18,022 c. $18,805 d. $15,671 An analyst will need to use the EA approach to evaluate projects with unequal lives when the projects are ____
Answer:
The equivalent annual annuity approach is one of two methods used in capital budgeting to compare mutually exclusive projects with unequal lives. The EAA approach calculates the constant annual cash flow generated by a project over its lifespan if it was an annuity.
An economist wants to determine whether average price/earnings (P/E) ratios differ for firms in three industries. Independent samples of five firms in each industry produced the following results after conducting a one-way ANOVA. SSB (sum of squares between groups) = 258.82 and SST (sum of squares total) = 424.04. Based on this information, the degrees of freedom associated with the SSB is equal to ___
The degree of freedom associated with the SSB in this scenario is 2. This means that we have two sources of variation: one between groups (SSB) and one within groups (SSW), and we can use these values to test for differences in the average P/E ratios across the three industries using a one-way ANOVA.
To determine the degrees of freedom associated with the SSB in this scenario, we need to first calculate the sum of squares within groups (SSW). This can be done by subtracting the SSB from the SST, which gives us:
SSW = SST - SSB
SSW = 424.04 - 258.82
SSW = 165.22
Next, we need to calculate the degrees of freedom associated with the SSB, which is equal to the number of groups minus one (k-1), where k is the number of groups. In this case, we have three industries, so:
df_SSB = k - 1
df_SSB = 3 - 1
df_SSB = 2
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