Answer: a. 11.5%
Explanation:
Fad followers are those investors who follow a trend when it emerges and as such their betas will be less than that of informed traders because the informed traders would have acted first.
Using the Capital Asset Pricing Model to calculate expected return.
Er = Rf + b( Rm - Rf)
Er = Expected return
Rf = Risk Free Rate
b = Beta
Rm = Market Return.
The Expected Return for the Informed Investors is,
= 4% + 1.4 ( 10% - 4%)
= 4% + 1.4 ( 6%)
= 12.4%
With the Fad followed expected to have a lower beta and therefore a lower expected return than the Informed Investors, the only suitable option is the 11.5%.
Answer: $50,301
Explanation:
If they offered the new terms of 2/10, net 30 then 45 percent of their customers would pay on day 10 with the remainder paying on average in 32 days.
The collection period would therefore be;
= 0.45 * 10 + 0.55 * 32
= 22.1 days
Currently the Average Daily sales are;
= Average Receivables/ Average collection period
= 211,410/29
= $7,290
With the new collection period their Average receivables would be;
= 7,290 * 22.1
= $161,109
Potential cash to be freed up = Current Receivables - New receivables
= 211,410 - 161,109
= $50,301
Answer:
$5,000
Explanation:
Given that,
Accounting profit = $10,000
Interest rate = 5%
Amount withdraw = $100,000
The economic profit is calculated by subtracting implicit costs and explicit costs from the total revenue.
Accounting profit is determined by subtracting explicit costs from the total revenue.
Accounting profit = Total revenue - Explicit costs
Economic profit:
= (Total revenue - Explicit costs) - Implicit costs
= $10,000 - (Interest income)
= $10,000 - (5% × $100,000)
= $10,000 - $5,000
= $5,000
Given that Lucky won $1000000 and has an option of receiving $50000 p.a for 30 years, the total amount received after 30 years in case he goes for option 2 will be:
amount=(yearly payment)+(number of years)
=(50000)×(30)
=$1,500,000
This implies that the second option is best choice. Given the information, we shall conclude that the best thing to do is to calculate the present value of the annuity payments.
The answer is D]
Answer:
D) $6,000.
Explanation:
Number of Employees = 20 employees
Earning per day = $100 per day
Total Earning per day = 20 x $100 = $2,000 per day
It is assumed that weekend days are off days and not being paid.
Week days Spent upto last day after payment = Wednesday - Last Monday
Week days Spent upto last day after payment = 3 days
Accrued Expense at the end of accounting period = 3 days x $2,000 per day = $6,000
