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2 years ago

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What happens to most projects' value under the CAPM if there is a sudden increase to its market-beta

1 answer:

Nana76 [90]2 years ago

5 0

Answer:

Its value increases

Explanation:

Here are the options to this question :

its value decreases

Its value increases

Its value stays the same

According to the CAPM ,

expected return of an asset = risk free rate + (beta x risk premium)

If the beta increases, the expected return of the asset increases and the value of the asset increases

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A particular product line is most likely to be dropped when: Group of answer choices its total fixed costs are more than its con

Snezhnost [94]

Answer:

A particular product line is most likely to be dropped when:

its total fixed costs are more than its contribution margin
its variable costs are more than its fixed costs
its unavoidable fixed costs are more than its contribution margin.

Explanation:

The aim of every producer is to maximize profit and to make this possible, the cost of producing a particular product should fall below the contribution margin.

In the case that the gross profit is always negative due to high cost of production, further production should be discouraged.

The decision to drop a particular product line is usually reached when:

Its total fixed costs are more than its contribution margin: Here, the company will run at a loss. It is sustainable to continue production..
Its variable costs are more than its fixed costs: This is also an unfavorable situation that does not sustain mass production. Therefore, further production should discontinue.
its unavoidable fixed costs are more than its contribution margin: At this rate, profit cannot be maximized. It is a lose-lose situation for the company.

8 0

2 years ago

Kathy is a financial analyst in BTR Warehousing’s. As part of her analysis of the annual distribution policy and its impact on t

olya-2409 [2.1K]

Answer and Explanation:

The computation is shown below.

1. Value of the firm operations is

= Free Cash Flow × (1 + Growth Rate) ÷ (WACC - Growth Rate)

= $87 million × (1 + 8%) ÷ (13% - 8%)

= $1,879.20

This is the answer but the same is not provided in the given options

2. The intrinsic value of equity immediately prior to stock repurchase is

= Value of Firm's Operations + Value of Non Operating Assets - Value of Debt - Value of Preferred Stock

= $1,879.20 + $120 - $232 - $145

= $1,622.20

This is the answer but the same is not provided in the given options

3. The intrinsic stock price immediately prior to stock repurchase is

= Intrinsic Value of Equity Prior to Stock Repurchase ÷ Number of Outstanding Shares

= ($1,622.20) ÷ (21.75 million shares)

= $74.58

This is the answer but the same is not provided in the given options

4. The number of shares repurchased is

= Cash Used for Repurchase ÷ Intrinsic stock price

= $120 ÷ $74.58

= 1.61

This is the answer but the same is not provided in the given options

5. The intrinsic value of equity immediately after stock repurchase is

= Value of Firm's Operations - Value of Debt - Value of Preferred Stock

= $1,879.20 - $232 - $145

= $1,502.20

This is the answer but the same is not provided in the given options

6. The intrinsic stock price immediately after stock repurchase is

= Intrinsic Value of Equity After Stock Repurchase ÷ Number of Outstanding Shares after Repurchase

= ($1,502.20) ÷ (21.75 million shares - 1.61 million shares)

= $74.59

This is the answer but the same is not provided in the given options

This statement is false because if the stock price changes after a firm conducts its share repurchase, then there are arbitrage opportunities. Thus, the price of the stock remains the same after a repurchase

6 0

2 years ago

Bickford Company plans to sell 135,000 units in November and 180,000 units in December. Bickford's policy is that 10% of the fol

NNADVOKAT [17]

Answer:

$404,000

Explanation:

Production Unit = $135,000 + $18,000 - $14,000 = $139,000

Labor hours per unit = 30 mins = 0.5 hours

Total Labor Hours = $139,000 x 0.5 = 69,500 hours

Variable Overhead 69,500 x 5 = $347,500

Total Overhead Cost = $347, 500 + $56,500 = $404,000

6 0

2 years ago

Riverboat Adventures pays $450,000 plus $5,000 in closing costs to buy out a competitor. The real estate consists of land apprai

kkurt [141]

Answer:

$150,150

Explanation:

Total fair value of all assets:

= Land + Building + Paddleboats

= $67,200 + $158,400 + $254,400

= $480,000

Building accounted for:

= Fair value of building ÷ Total fair value

= $158,400 ÷ $480,000

= 33%

Therefore, the building is 33% of the total fair value of assets.

Cost of acquisition of assets:

= Amount paid + Closing cost to buy out a competitor

= 450,000 + 5,000

= $455,000

Cost to be allocated to the building:

= Cost of acquisition of assets × Percent share in total fair value

= $455,000 × 33%

= $150,150

8 0

2 years ago

We reached our goal by helping 2000 customers this month which is 14% more than last month." Employee: "That means that we must

Sergeeva-Olga [200]

Answer:

1720

Explanation: 14 percent of 2000 is 280. 2000-280=1720

6 0

2 years ago

Read 2 more answers