Answer:
The answer is below
Explanation:
The graph is attached below.
a) The price elasticity of demand is given by:
price elasticity of demand = 
Price of elasticity demand = 
Price of elasticity demand = 
Since the price of elasticity demand > 1, it is elastic
b) Price of elasticity demand = 
Since the price of elasticity demand = 1, it is unitary
c) Price of elasticity demand = 
Since the price of elasticity demand < 1, it is inelastic
Answer:
McDonald's Corp
The cost of capital for the preferred stock is:
10.67%
Explanation:
a) Data and Calculations:
Market price of preferred stock = $178
Preferred stock dividend = $19
Cost of capital = Preferred stock dividend/Market price of preferred stock * 100
= $19/$178 * 100
= 10.67%
b) The cost of capital for McDonald's preferred stock is the finance cost or interest cost that it must incur for financing its projects using preferred stock. This represents the 10% of the preferred stock value that is paid out to preferred stockholders.
Answer:
Projects Y and Z
b. Projects W and Z
c. Projects W and Y
Explanation:
CAPM equation : Expected return = Risk free rate + Beta x (Expected market return - Risk free rate)
W = 4% + [0.85 x (11% - 4%)] = 9.95%
X = 4% + (0.92 x 7%) = 10.44%
Y = 4% + (1.09 x 7%) = 11.63%
Z = 4% + (1.35 x 7%) = 13.45%
Projects Y and Z have an expected return greater than 11%
b. Projects W and Z should be accepted because its expected return is higher than the IRR
c. Project W would be incorrectly rejected because the expected rate of return is less than the overall cost of capital (i.e. 9.95 is less than 11). But its expected rate of return is greater than the IRR
Y would be incorrectly accepted because its expected rate of return is greater than the overall cost of capital but its expected rate of return is less than the IRR
20-(65)xy-mx+b might ce the ranch house stock
Answer: $35,000
Explanation:
The payments of $1,033.34 at the end of every month is a constant amount which makes it an annuity.
Present value of annuity:
= Annuity * (1 - (1 + rate) ^-no. of periods) / rate
Rate needs to be made a monthly rate:
= 4%/12
= 4/12%
= 1,033.34 * ( 1 - ( 1 + 4/12%) ⁻³⁶/ 4/12%
= $35,000
Purchase price = Down payment + Present value of annuity
= 4,000 + 35,000
= $39,000
