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zzz [600]
2 years ago
6

Decker's is an all-equity financed chain of retail furniture stores. Furniture Fashions produces furniture and is the primary su

pplier to Decker's. Decker's has a beta of 1.62 as compared to Furniture Fashions' beta of 1.43. The risk-free rate of return is 3.1 percent and the market risk premium is 7.6 percent. What discount rate should Decker's use if it considers a project that involves the manufacturing of furniture
Business
2 answers:
Vinil7 [7]2 years ago
5 0

Answer:

13.968%

Explanation:

Discount is defined as a deduction from the selling price of a product, and it is used as a way to attract more customers by using price advantage compared to competitors.

The following formula can be used to calculate discount

Discount rate = Rate of return + Competitor's beta (market risk premium)

Discount rate = 0.031 + 1.43(0.076)

Discount rate= 0.13968= 13.968%

MrRissso [65]2 years ago
5 0

Answer:

Discount rate = 15.4%

Explanation:

<em>The cost of equity of Decker can  be determined using the capital asset pricing model. </em>

<em>The capital asset pricing model is a risk-based model. Here, the return on equity is dependent on the level of reaction of the the equity to changes in the return on a market portfolio. These changes are captured as systematic risk. The magnitude by which a stock is affected by systematic risk is measured by beta. </em>

Under CAPM, Ke= Rf + β(Rm-Rf)

Rf-risk-free rate (treasury bill rate), β= Beta, Rm= Return on market.

Ke? Rf- 3.1, β- 1.62, Rm-Rf = 7.6

Ke =3.1 + (1.62× 7.6)= 15.4%

Discount rate would be the same as the cost of equity.

Discount rate = 15.4%

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Leopard Machinery is analyzing a proposed project. The company expects to sell 2,300 units, give or take 4 percent. The expected
GenaCL600 [577]

Answer:

$551,074

Explanation:

Sales revenue

Worst case

Budget sales = 2300 units

Estimated sales price = $750

Sales unit = (100%-4%*2300)

2208 units

Sales price = (100%-6%*750)= 705

Sales revenue =2208*705 =$1,656,000

b) Operating cash flow at worst case sales revenue

Variable cost - $260 *(100%-5%)

=$247

Total variable cost = $247* 2208= $545,376

Fixed cost = $589000*(100%-5%)

$559550

Operating cash flow = (1656000-545376-559550) =551,074

6 0
2 years ago
At the Bourg Company, a primary ______ is to increase the monthly revenue by 10%. Bourg considers revenue targets a key part of
mr_godi [17]

Considering the subsequent description given in the question, At the Bourg Company, a primary <u>sales goal</u> is to increase the monthly revenue by 10%.

This is evident in the fact that Bourg considers revenue targets a vital part of the company strategy. Here, the revenue of a company is derived from <u>sales</u>.

Also, given that the targets at the Bourg Company are stated in clear, precise, and measurable terms, and they always specify a time frame for completion, this is an example of a <u>sales goal.</u>

<u>Sales goal</u> is a term used in business management to describe the defined goals for a firm's sales team.

Sales goals could be expressed as increasing revenue by 13% in a year or improving customer retention by 18%.

Hence, in this case, it is concluded that the correct answer is "<u>sales goals."</u>

Learn more here: brainly.com/question/23162020

6 0
1 year ago
Beta Limited has opening PP&amp;E balance of 150, a depreciation expense of 75, and a closing PP&amp;E balance of 170, what is B
Tems11 [23]

Beta's Net capital expenditure is 95.

Explanation:

The computation of the Beta's net capital expenditure is given below

Closing PP&E balance + Depreciation Expense - Opening PP&E balance

= 170 +75 - 150

= 95

While computing it, we have added the depreciation expense and deducted the PP &E balance to the closing PP&E balance so that the accurate amount can be more.

It can also be calculated by capital expenditures by using data from a company's income statement and balance sheet.  In the income statement, find the amount of depreciation expenses recorded for the current period. in the balance sheet the current period's property, plant and equipment are placed in line- item balance.

4 0
2 years ago
Read 2 more answers
Shoe manufacturers are not going to buy much more leather if the price of leather falls, nor will they buy much less leather if
IgorC [24]

Answer:

A) inelastic demand

Explanation:

Demand is inelastic if a change in price has no effect on quantity demanded.

Changes in price has no effect on quantity of leather demanded. Therefore, the demand for leather is inelastic.

Direct purchasing is buying raw materials used in the production process.

Straight rebuy is purchasing similar goods from the same supplier under similar conditions.

Modified rebuy is purchasing similar goods either from a different supplier or in a different condition.

4 0
2 years ago
Imagine two cities, Hometown and Visitorsville, where the rich, middle, and poor income recipients in one city have annual incom
Grace [21]

Answer:

The answer is letter A.

Explanation:

The true statement is Annual data on the distribution of income will indicate that the degree of income inequality in the two cities is identical.

6 0
2 years ago
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