$305,000, $360,000,$560,000,$275,000 are the profit of wood products inc. for the previous year if the method of inventory costing adopted was absorption costing.
An income that is distributed to the owner in a successful market production process is known as profit in accounting (business). Profit is a metric of profitability, which is of primary concern to the owner in the process of market production that generates money. Various profit metrics are frequently used.
The balance between income distribution and income generating is constant in market production. Every time during the review period, the earned income is allocated as economic value to the production's stakeholders. The profit is the portion of income creation that the owner is able to retain for themselves during the income distribution process. Since it translates into money and presents chances for expanding production, profit is one of the main drivers of economic prosperity. Earnings, earnings, and profit are all synonyms for income.
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you can obtain a loan of $100,000 at a rate of 10 percent for two years. you have a choice of (i) paying the interest (10 percent) each year and the total principal at the end of the second year or (ii) amortizing the loan, that is, paying interest (10 percent) and principal in equal payments each year. the loan is priced at par. what is the duration of the loan under both methods of payment? explain the difference in the two results.
the duration of the loan under both methods of payment:
(i) D = 1.9091
(ii) D = 1.4762
the difference between the two outcomes:
When a portion of the principal is repaid at the end of year one, the duration decreases dramatically. The duration of an asset is its weighted-average maturity. When early payments are given more weight, the effective maturity of the asset is reduced.
Loan for two years: Interest at the end of the first year; Principal and interest at the end of the second year
Par value = $100,000
Coupon rate = 10%
Annual payments
R = 10%
Maturity = 2 years
Two-year loan: Amortized over two years
Par value = $100,000
Coupon rate = 10%
Annual amortized payments = $57,619.05
R = 10%
Maturity = 2 years
Annual amortized payments is calculated as
× 1−(1+10%)−2 / 10% =100,000, PMT = 57,619.05
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which of the following statements is correct? question 27 options: a) a change in demand is a movement along the demand curve, and a change in quantity demanded is a shift of the demand curve. b) both a change in quantity demanded and a change in demand are movements along the demand curve, only in different directions. c) a change in quantity demanded is a movement along the demand curve, and a change in demand is a shift of the demand curve. d) both a change in quantity demanded and a change in demand are shifts of the demand curve, only in different directions.
Statement C is correct: A change in quantity demanded is a movement along the demand curve, and a change in demand is a shift of the demand curve.
A demand curve in economics is a graph that shows the relationship between a commodity's price (on the y-axis) and how much of it is demanded at that price (on the x-axis). Demand curves can be used to analyze the price-quantity connection for either a single consumer (an individual demand curve) or for all consumers in a specific market (a market demand curve).
Demand curves are often thought to slope downward, as the figure to the right illustrates. This is due to the rule of demand, which states that for most things, the quantity required decreases as the price increases. This rule does not apply in some peculiar circumstances.
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ray has a great idea for a dating app, but he doesn't have the funds to develop and launch it. his brother offers to help him develop it for free, in exchange for a percentage of future profits. what type of financing resource is ray using? a.) factoring b.) peer-to-peer lending c.) trade credit d.) sweat equity
Peer-to-peer networks protect your personal and financial information just as a typical bank or online lender would, in terms of security.
Peer-to-peer lending: how does it operate?P2P lending uses online channels to establish direct communication between those looking to lend money and those looking to borrow money. As a result, you obtain financing from private investors who have registered on a P2P lending platform rather than a bank or credit union. Peer-to-peer networks protect your personal and financial information just as a typical bank or online lender would, in terms of security. They can be made to a person, business, or organization. Student loans, commercial and real estate loans, payday loans, secured company loans, leasing, and factoring are some more types of peer-to-peer lending.
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A retirement or abandonment of an asset is different from a sale of an asset because?.
A retirement or abandonment of an asset is different from a sale of an asset since a loss must be recognized for the remaining book value.
When a durable asset stops being used, it is regarded as having been disposed of. A retired or abandoned asset loses value by the carrying amount that applied at the time of retirement or abandonment. The asset's carrying value is then reduced by the resulting loss. An asset's retirement or abandonment differs from its sale in that no money is exchanged.
The remaining book value requires a loss to be recorded. When an asset is permanently withdrawn from service, it is counted as retired. Asset retirement might happen via procedures like a sale to a different party or disposal because of obsolescence.
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6) which of the following would best indicate that the firm is carrying excess inventory? a. a decline in sales b. a decline in the current ratio c. a decline in days' sales in inventory d. a stable current ratio with declining quick ratios e. a rise in total asset turnover
A stable current ratio with declining quick ratios would best indicate that the firm is carrying excess inventory.
When a company has excess inventory on hand than is necessary to fulfill expected demand, this is referred to as excess inventory. This may result in several operational difficulties and budgetary limitations.
A steady current ratio with a decreasing quick ratio over time can be a sign that you've accumulated too much inventory. If a company's quick ratio is much lower than its current ratio, it may be severely lacking in other liquid assets and relying largely on inventory.
A loss of revenue results from having too much inventory. As demand for a certain product declines over time, excess inventory loses value and takes up "shelf space" that could be occupied by a newer product with a larger profit margin.
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, like research and development, that already occurred should not be part of cash flow analysis in the capital budgeting process. a.) salvage values b.) sunk costs c.) replacement costs d.) financing cash flows
Sunk costs like research and development, that already occurred should not be part of cash flow analysis in the capital budgeting process.
A sunk cost also referred to as a retrospective cost, is an earlier investment that cannot be recovered. Marketing, research, new software installation or equipment, salaries, benefits, or facility charges are a few examples of buried costs in the company.
An expense that has already been incurred and cannot be recovered is known as a sunk cost in economics and business decision-making. The term "sunk costs" is used to contrast with "prospective costs," which are costs that might be avoided if action is taken in the future.
Theoretically, according to economists, sunk costs have no bearing on decisions made in the future. Sunk costs can and do, however, have a big impact on decisions that are made in the present.
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silicon is used for the manufacturing of semiconductor chips. at the end of last year a large new source of silicon has been discovered this year and the price of silicon has decreased by 15%. semiconductor chips are used in devices, cell phones, gaming systems, and this year many new devices are now using chips. if you were drawing a supply and demand graph to illustrate the changes to the semiconductor market since last year, what would you say has happened to the supply and demand curves and the equilibrium price and quantity this year?
It is a tetravalent metalloid and semiconductor that has a blue-grey metallic sheen and is a hard, brittle crystalline solid.
Chemical element silicon has the chemical symbol Si (silicon) and atomic number 14. It is a tetravalent metalloid and semiconductor that has a blue-grey metallic sheen and is a hard, brittle crystalline solid. It belongs to group 14 of the periodic table, which is above carbon and below germanium, tin, lead, and flerovium. It doesn't react all that much.
It wasn't until 1823 that Jon's Jakob Berzelius was able to prepare and analyze it in pure form due to its strong chemical affinity for oxygen. Its oxides belong to the silicate family of anions. Only boron has higher melting and boiling points than its respective values of 1414 °C and 3265 °C among all metalloids and nonmetals.
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assume disposable income increased by $2,500 and consumption spending increased by $2,000. what is the marginal propensity to consume (mpc)?
The marginal propensity to consume (MPC) was 0.2 .
The marginal propensity to save (MPS) is an economic measure of how savings change as income changes. It is simple to calculate by dividing the change in savings by the change in income. A higher MPS suggests that small changes in income result in large changes in savings, and vice versa.
The Master Production Schedule (MPS) is a comprehensive timetable of our future production. It specifies what product will be manufactured, when it will be manufactured, and in what quantity.
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a professionally managed portfolio of assets intended to provide income to retirees is called: multiple choice a mutual fund. a stock. a derivative. investing by proxy.
Mutual fund to provide income to retirees
An individual or organization in charge of managing a mutual fund, hedge fund, or other assets in a portfolio is known as a portfolio manager.
A portfolio is a collection of financial investments, such as commodities, securities, stocks, and bonds. The portfolio manager is an expert who manages the resources of their clients to achieve the specified investment goals.
The selection of the securities that go into a portfolio and control of its daily trading are the main responsibilities of a portfolio manager.
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kinsey corporation issues $100,000 of 8% bonds, due in 25 years, when the market rate of interest is 9%. interest is paid semiannually on june 30 and december 31. the issue price of the bonds is:
The $100,000 8% bonds from Kinsey Corporation have a 25-year maturity and a 9% market interest rate. Interest is paid twice a year on June 30 and December 31. The issue price of the bond is $90,119.
What does the term "bond issuance" mean?Governments and businesses issue bonds when they need to raise capital. In essence, you are making a loan to the issuer when you buy a bond. In return, they agree to repay you the full amount of the loan on a specific date and to pay you interest on a regular basis (typically twice a year).
In the given question,
Face value= $100,000
Interest rate= 8%
Since interest is paid semi-annually, its value is
Interest= 100000 X [tex]\frac{8}{100}[/tex] X [tex]\frac{6}{12}[/tex] = 4000
Market interest rate = 9%
Time = 25 years
Annuity factor's current value= [tex]\frac{1- (1+r)^{-n} }{r}[/tex]
= [tex]\frac{1- (1+0.045)^{-50} }{0.045}[/tex]
=19.7620089
Present value factor= [tex]\frac{1}{(1+r)^{n} }[/tex]
= [tex]\frac{1}{(1+0.045)^{50} }[/tex]
= 0.11070965
Bond value is calculated as follows:
= (Present annuity factor value X interest payment) + (present value factor × face value)
= (19.7620089 X 4000) + (0.11070965 X 100000)
= 90,119 (approx)
The bonds have a $90,119 issue price.
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charisma, inc., has debt outstanding with a face value of $5.1 million. the value of the firm if it were entirely financed by equity would be $22 million. the company also has 370,000 shares of stock outstanding that sell at a price of $47 per share. the corporate tax rate is 21 percent. what is the decrease in the value of the company due to expected bankruptcy costs? (do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.)
The decrease in the company value due to expected bankruptcy costs is $581,000
Debt outstanding = $5.1 million
Value of equity = $22 million
Stock outstanding = 370,000 shares
Selling price per share = $47
Corporate tax = 21%
Calculating the value of the levered firm -
= Value of equity + Value of debt × Tax rate
= 22,000,000 + (5,100,000 × 0.21)
= 22,000,000 + 1,071,000
= 23,071,000
Calculating the total market value of the firm:
= Market value of debt + Stock outstanding × Share selling price
= 5,100,000 + (37000 × 47)
= 5,100,000 + 17,390,000
= 22,490,000
In this case, one would anticipate that the value of the leveraged firm and the overall market value of the firm would be equal. However, bankruptcy costs fall under non-marketed claims.
Calculating bankruptcy
= Value of the levered firm - Total market value of the firm
= 23,071,000 - 22,490,000
= 581,000
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a large manufacturing company has found that younger employees tend to have fewer medical problems than workers over 40. therefore, management decided to hire only workers under 40 to reduce company health insurance costs. this is illegal under the
To cut business health insurance costs, management decided to hire exclusively people under the age of 40. This is a violation of the Age Discrimination in Employment Act.
A health insurance policy is a contract between a firm and a consumer. In exchange for payment of a monthly premium, the employer offers to pay all or part of the insured person's healthcare costs. The contract is often a one-year arrangement in which the insurer is liable for paying particular expenses linked to illness, injury, pregnancy, or preventative treatment.
A deductible compels the consumer to pay some healthcare costs "out of pocket" up to a specified level before the company's coverage begins. In exchange for a monthly premium payment, health insurance covers the majority of the insured's medical and surgical expenses as well as preventative care costs.
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in preparing the april bank reconciliation for oscar company, it was discovered that on april 10 a check was written to pay delivery expense of $45 but the check was erroneously recorded as $54 in the company's books. which of the following journal entries would correct this error? multiple choice account title debit credit delivery expense 45 cash 45 account title debit credit cash 9 delivery expense 9 account title debit credit delivery expense 9 cash 9 account title debit credit cash 54 delivery expense 54
Correction for this error would result in an increase in cash and a $9 reduction in shipping costs.
Why have shipping charges gone up?Public health rules prevented ship and truck personnel from crossing international borders. Supply networks were unable to keep up with the increased demand brought on by extensive lockdowns and large stimulus packages. In addition to adding to delivery delays, the price of moving products increased.The cost of shipping containers is declining globally as a result of the quick reduction in shortages and congestion that afflicted maritime trade for a significant portion of the epidemic (see chart). In addition to providing an indication of decreasing demand in the global economy, the decline may help to lower the stubbornly high inflation rate.To learn more about Shipping cost refer to:
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you plan to fund your individual retirement account (ira) with the maximum contribution of $2,000 at the end of each year for the next 10 years. if you can earn 10 percent on your contributions, how much will you have at the end of the tenth year?
The annuity payment has a cumulative value of $31,874 at the end of the tenth year
In order to answer this issue, we must determine how much money I would have at the conclusion of the 10th year if the contributor contributed a maximum of $2,000 at the end of each of the next ten years and earned a 10% return on his investment.
The annuity formula can be used to resolve this type of issue. In other words, the accumulated value at the conclusion of the tenth year can be determined using the annuity formula.
A set of payments that are made at regular intervals is known as an annuity.
The formula for annuity future value is:
Payment for an annuity * [(1 + r)n - 1]/r
where n is the number of years and r is the discount rate.
We have determined the following to be utilized in this query:
in the equation.
The annual maximum payable contribution for an annuity is $2000.
Years equals 10 years.
The discount rate is 10 percent (10/100) or 0.1.
These numbers are entered into the formula:
Future accumulated value is equal to 2000 times [(1+0.1)101]/0.1, or 2000 times [(1+0.1)101].
/0.1
= 2,000 * (2.5937-1)/0.1 = 2,000 * (1.5937)/0.1 = 2,000 * 15.937
= $31,874
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if you borrow money on a single-payment loan and discover that you cannot pay it back when it is due, you should:
If you borrow money on a single-payment loan and discover that you cannot pay it back when it is due, you should: a. consolidate the loan.
A mortgage that you repay with one unmarried charge at the end of a specific time frame is called a single-fee mortgage. The adulthood fee of a mortgage is the total quantity you need to repay, together with the predominant and any interest you incur. The time period of the loan is the time for which it's been granted.
these notes payable require you to repay the lender the main borrowed plus the hobby charged multi-functional lump-sum fee through the due date certain in the notice.
unmarried-fee loans can be available in several one-of-a-kind bureaucracies. Many loans require the borrower to make numerous month-to-month bills until their loan is paid in complete. but, unmarried-fee loans are paid lower back with one massive charge by way of the due date determined by the lender. One not unusual shape of an unmarried-price mortgage is known as a payday loan.
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james purchased a new business asset (three-year personalty) on july 23, 2018, at a cost of $40,000. james takes additional first-year bonus depreciation but does not elect section 179 expense on the asset. determine the cost recovery deduction for 2018.
Additional first-year depreciation ($40,000 × .50) $20,000 MACRS cost recovery ($20,000 × .3333) 6,666 Total cost recovery $26,666.
In accountancy, depreciation is a time period that refers to 2 components of the same idea: first, the actual decrease of honest cost of an asset, consisting of the decrease in value of manufacturing facility equipment every 12 months as it's far used and wear, and 2d, the allocation in accounting statements of the unique value of the belongings to intervals wherein the assets are used (depreciation with the matching principle). Depreciation is accordingly the decrease in the price of belongings and the technique used to reallocate, or "write down" the price of a tangible asset (which includes a system) over its useful life span. Companies depreciate long-time period belongings for each accounting and tax purposes.
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in a single-stage decision tree problem, you make first and then all you wait to see a(n) .
In a single-stage decision tree problem, all decisions are made first and then all uncertainty is resolved.
Every path from a root to a leaf in a decision tree corresponds to a state in a state-based representation. However, it is frequently easier and more effective to express and think in terms of certain properties, which are referred to as variables.
All decisions in a single-stage design model must be made at the start of the planning horizon. Particularly, a single-stage formulation results in the identification of a system design that can address the entire spectrum of production issues, both present and future.
This refers to making a single choice in response to the input scenario tree, where the choice is represented by a striped circle at the decision node. The FFMS design approach's two-stage stochastic formulation enables the modeling of the manufacturing system's reconfiguration at a later time stage.
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Correct question:
In a single-stage decision tree problem, all ----- are made first and then all ------ is (are) resolved.
at one time, as a condition of employment, the employer could make the employee sign a statement prohibiting the worker from joining a union. what was this called?
Previously, the employer might require the worker to sign a declaration saying they are not allowed to join a union as a condition of employment. National Education Association, if that's what it was (NEA).
The largest union in the country is the National Education Association (NEA). It is made up of teachers and other support staff from public schools, academic staff from colleges and universities, retired educators, and college students majoring in education.
National Education Association (NEA), an American voluntary organization of educators working in colleges, institutions, and elementary and secondary schools. It is the biggest professional association in the world. Washington, D.C. serves as its administrative center.
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close company purchased merchandise inventory with an invoice price of $9,000 and credit terms of 2/10, n/30. what is the net cost of the goods if close company pays within the discount period?
$ 8,820 is the net cost of the goods if close company pays within the discount period with an invoice price of $9,000.
given data:
invoice price = $9,000
credit terms are 2/10, n/30
Net Cost of Goods = invoice price -( invoice price / discount )
2/10, n/30 is known that if the payment will be made with in 30 days of purchase, it can get a discount of 2 % on purchases.
discount = 2%
by substitution, we get:
= $ 9,000 - $ 9,000 * 2%
= $ 8,820
the net cost of the goods is $ 8,820
The actual cost of a product as paid for by the end user retailer to the manufacturer or distributor is known as the invoice price. The "invoice cost," or the price of a product, differs from the "net purchase cost" in many industries.
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if a balance sheet shows $4 million in current assets, $7 million in long-term assets, $2 million in current liabilities and $6 million in long-term liabilities, what is the company's net working capital? $2 million $3 million $1 million $4 million
The current assets mentioned are $4 million while the current liabilities are $2 million in current liabilities, therefore company net working capital is $2 million.
Hence, option A is correct.
What is net working capital?
Net Working capital can be defined as the difference between a company current assets which can be in the form of cash, accounts , unpaid bills , inventories and its current liabilities which can be account payable and debts. It helps in measuring short term liquidity, management of company and to utilize resources efficiently.
Net working capital = Current assets - Current liabilities
= $4 million - $2 million
= $2 million
Hence, the company net working capital is $2 million.
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a business process can be thought of as a series of events that bring together three elements in ways that create valuable outcomes. two of those elements are people and technology. what is the third element?
The third element is Information.
a business process can be thought of as a series of events that bring together three elements (people, technology, and information) in ways that create valuable outcomes
A business process is a set of tasks or activities carried out by a group of stakeholders in order to achieve an organizational goal. People or systems carry out processes in a structured manner to achieve a predefined goal. Efficient and streamlined business process execution directly contributes to the success and growth of business operations.
The work is done by the people. This work is more efficient with accurate information. Technology enables people to complete their tasks while also monitoring and controlling information. Thus, businesses can achieve organizational efficiency by balancing the three and optimizing the relationships between people, information, and technology, businesses can achieve organizational efficiency.
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which of the following are included in the net tax flows between businesses and the government? multiple select question. sales taxes low-interest government loans income taxes federal employee salaries
Include income taxes, low-interest government loans, and sales taxes in the net tax flows between businesses and the government.
What is an illustration of a tax expense?Tax expenditures include, for instance, individual itemized deductions for charitable contributions, mortgage interest, and state and local taxes.
Which method of taxation generates more revenue for the government?According to the Income Tax Act of 1962 (the Act), income tax is the primary source of revenue for the government.
What is the taxation system?There are numerous tax forms in the system, each of which is unique. This framework is a bunch of establishments and instruments accessible to burden experts for accomplishing specific financial, monetary, social and political objectives inside the monetary framework.
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You follow the suggestion of your cousin on which computer to buy. What category of influence is this?
50 Points/Please give a real answer only else will have to report the account.
Thank you.
One possible solution to a diminishing social security payroll is to increase the social security tax by 1.89%. how would such an increase effect the tax on an annual salary of $54,000? a. annual tax would increase by $1,020.60. b. annual tax would increase by $2,327.40. c. annual tax would increase by $3,348.00. d. annual tax would increase by $4,368.60. please select the best answer from the choices provided a b c d
If the social security tax increase by 1.89%, the annual tax would increase by $1,020 on an annual salary of $54,000.
To solve the diminishing social security payroll the social security tax increases which will result in an increase in the annual tax on salary. This is calculated as
Increase in Annual Tax=Salary × increase in social security tax
From the question we have
The salary which is equal to $54,000
the social security tax increase by 1.89%,
Increase in Annual Tax=$54,000 × 1.89%,
=$1,020.60
Therefore, the correct option is (a) annual tax would increase by $1,020.60.
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what challenge is often experienced when employees make the transition from hourly worker to supervisor?
Uncertainty regarding the changing focus and a confusing impression of loss of accomplishment and outcomes. Employees frequently encounter this difficulty while moving from an hourly position to a supervisory position.
Leaving the peer group to become the group supervisor is one of the most challenging leadership transitions. More than any other transition, this one is dotted with landmines. In their excitement over their promotion, many new leaders will fail to lay the necessary foundations for a smooth transfer.
It can be difficult to make the move from employee to supervisor, and many new supervisors end up working too much to make up for it. Potential side effects of overwork include stress, illness, mood swings, and eventually burnout.
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georga's restaurants has 5,000 bonds outstanding with a face value of $1,000 each and a coupon rate of 8.25 percent. the interest is paid semiannually. what is the amount of the annual interest tax shield if the tax rate is 37 percent?
The amount of the annual interest tax shield if the tax rate is 37 percent is 152625.00.
How much is the yearly interest tax shield?
=5000*1000*8.25%*37%
=152625.00
In scenarios described in its various provisions, the Interest Tax Act of 1974 regulates the tax procedure related to the imposition and collection of Interest Tax.
All Scheduled Banks that must pay tax on the chargeable interest amounts they have on their deposits are covered by the Act.
The rate at which this interest tax must be applied is 7% (seven percent) of the total amount of chargeable interest. For interest accrued after 31 March 1983, the rate was changed to 3.5% (Three and a half percent), 3% (Three percent) subject to specific restrictions after 31 March 1992, 2% (Two percent) after 31 March 1997, and there was no interest tax accruing or arising after 31 March 2000. Government taxation is 15.5% overall in India.
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the primary insurer has a 40% quota share treaty with a reinsurer as shown below: the risk premium is decided as 0.002 of the risk amount (sum insured) the sum insured by the primary insurer is 1,000,000. according to the treaty, the primary insurer retain 60% of the sum insured and the reinsurer accept the 40% of the sum insured. at the end of the insurance period, the amount of losses is reported as 800,000. how much does the reinsurer accept the risk, which is the value of x in the table?
The value of (X) reinsurer accepts is 400000. the value of (Z) reinsurer accepts is 320000. the value of (Y) reinsurer accepts is 800.
The primary insurer retains = Sum Assured x% of primary retains = 1,000,000 x 60% = 600,000.
Reinsurer accepts = Sum Assured x% of Reinsurer Quota Share = 1000000 x 40% = 400000
The reinsurer accepts a premium of x% of the reinsurer quota share, which is 2000 multiplied by 40% to equal 800.
The losses the reinsurer accepts = losses x% of reinsurer quota share = 800000 x 40% = 320000
The value of (Z) that the reinsurer accepts is 320000.
The standard regular conjugation is used after "accepts": I accept, you accept, he or she accepts (singular); we accept, you accept, they accept (plural). A company that offers financial security to insurance companies is referred to as a reinsurer. Reinsurers manage risks that are too big for insurance companies to manage on their own and enable insurers to attract more business than they otherwise would.
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in an efficient market, daily abnormal returns: group of answer choices reflect news within the past week. reflect news since the prior trading day. remain constant. are very volatile. do not exist.
In an efficient market, daily abnormal returns are very volatile.
According to the green marketplace hypothesis, it's miles not possible for the traders to attain abnormally excessive returns. Because the charge of an asset consists of all to be had facts which may also have an effect on the charge of the product.
Market performance refers to how nicely modern-day expenses mirror all to be had, applicable facts approximately the real price of the underlying assets. A genuinely green marketplace gets rid of the opportunity of thrashing the marketplace, due to the fact any facts to be had to any dealer is already included into the marketplace charge
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Suppose you are working with two factor portfolios, portfolio 1 and portfolio 2. The portfolios have expected returns of 15% and 6%, respectively. Based on this information, what would be the expected return on well-diversified portfolio A, if A has a beta of 0. 80 on the first factor and 0. 50 on the second factor? The risk-free rate is 3%
Using the CAPM multifactor model:
Expected return of the portfolio A = risk free rate Rf + beta 1 * ( expected return of portfolio 1 - risk free rate) + beta2* ( expected return of portfolio 2 - risk free rate)
= 3 + 0.8 * ( 15-3 ) + 0.5 * ( 6-3 )
= 14.1%
So, the expected return on well - diversified portfolio A is 14.1 %
What is CAPM multifactor model?
The Capital Asset Pricing Model (CAPM) describes the relationship between systematic risk, or the general perils of investing, and expected return for assets, particularly stocks.
It is a finance model that establishes a linear relationship between the required return on an investment and risk. The model is based on the relationship between an asset's beta, the risk-free rate (typically the Treasury bill rate), and the equity risk premium, or the expected return on the market minus the risk-free rate.
CAPM evolved as a way to measure this systematic risk. It is widely used throughout finance for pricing risky securities and generating expected returns for assets, given the risk of those assets and cost of capital.
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impossible corporation just paid a dividend of $1.93 per share. the dividends are expected to grow at 24 percent for the next eight years and then level off to a growth rate of 3.5 percent indefinitely. if the required return is 12 percent, what is the price of the stock today? (do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Consequently, the share price is $78.09
The dividend growth model establishes the connection between a stock's intrinsic value and dividend payments. The stock's value is based on the present value of all dividends discounted at the required rate of return, and it assumes that dividend growth is constant.
The stock price after eight years is as follows:
D0 = $1.93 The growth rate over the next eight years is 12 percent; D8 = D0 * (1 + 0.16)8 = $4.26 The growth rate after that is g = 0.05; D9 = D8 * (1 + 0.05) = $4.475 Let the price be P8 after eight years. The required return is 11 percent = 0.11.
What differentiates growth from growth rate?The factor by which a quantity multiplies itself over time is called the growth factor. The sum by which a quantity grows or shrinks over time is known as its growth rate.
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