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zzz [600]
1 year 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]1 year 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]1 year 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%

You might be interested in
Which of the following captures the specific actions that leaders take to influence others at work? A.Leadership styles and beha
Tom [10]

Answer:

A.Leadership styles and behaviours

Explanation:

-Leadership styles and behaviours refer to the approach and actions a leader take to direct, motivate and guide people.

-Team processes refer to how the team works to accomplish goals.

-Team characteristics refer to the qualities that a group of people that work together possess.

-Leader power and influence refer to the ability a leader has to convince people to do certain things and achieve a goal.

According to this, the option that captures the specific actions that leaders take to influence others at work is leadership styles and behaviours.

7 0
2 years ago
A sales associate moves from Jacksonville, Florida, to Atlanta, Georgia. The associate continues to be employed by the same brok
-BARSIC- [3]

Answer: The sales associate must notify the DBPR in writing within 60 days regarding her change in residency

Explanation:

The options are:

a. The states associate broker is required to file the change of address on her behalf.

b. The sales associate broker is not required to notify DBPR because she did not change employers.

c. The sales associate must notify the DBPR in writing within 60 days regarding her change in residency.

d. The sales associate must file an application for Georgia real estate license.

From the question, we are informed that a sales associate moves from Jacksonville, Florida, to Atlanta, Georgia. The associate continues to be employed by the same broker, who has an office in Atlanta.

Based on the scenario, the sales associate should let the DBPR be aware that he or she has moved from

Jacksonville, Florida, to Atlanta, Georgia by writing to them within 60 days regarding her change in residency.

6 0
2 years ago
Angela will need $2000 in three years so that she can take a cruise vacation with some of her friends. She just received a large
Gemiola [76]

Answer:

$1,883.81

Explanation:

To calculate this, we use the formula for calculating the present value (FV) as follows:

PV = FV ÷ (1 + r)^n ……………………………………………. (1)

PV = Present value or the amount to invest in the CD = ?

FV = future value or the amount needed in three years = $2,000

r = interest rate = 2% annually = 2%/4 quarterly = 0.5% or 0.005 quarterly

n = number of period = 3 years = (3 × 4) quarters = 12 quarters

Substituting the values into equation (1), we have:

PV = 2,000 ÷ (1 + 0.005)^12 = 2,000 ÷  1.0616778118645 = $1,883.81

Therefore, Angela should invest $1,883.81 in the CD.

4 0
2 years ago
Burton Bush wants to retire in Arizona when he is 80 years of age. Burton, who is now 55, believes he will need $500,000 to reti
Rudik [331]

Answer:

$116,499.15

Explanation:

To find the amount he will have to invest today, we have to find the present value of $500,000 at the 6% interest rate

PV = FV (1+r)^-n

PV = Present value

FV = Future value = $500,000

R = interest rate = 6%

N = number of years = 25

$500,000 ( 1 + 0.06) ^-25 = $116,499.15

I hope my answer helps you

8 0
2 years ago
hich of the following is not a reason why government agencies subsidize basic research? a. The private market devotes too few re
Oxana [17]

Answer:

 c. The government wants to attract the brightest researchers away from private research firms

Explanation:

Research is one of the activities that generates postive externality.

Positive externality is when the benefits of economic activities to third parties exceeds the costs.

Activities that generates postive are usually underproduced because of the high cost associated with it. In order to encourage production, the government usually grants subsidies.

I hope my answer helps you

4 0
2 years ago
Read 2 more answers
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