Answer:
4%
Explanation:
For Builtrite, we can find the probability of cash flows by using the following formula:
Z = (X - C) / S
Average Cash Flow is $16000 which denoted by "C"
Standard Deviation is $4000 and is denoted by "S"
And
For cash flows that are less than $9000 which is denoted by X in the equation, "Z" can be calculated as under:
Z = (X - C) / S = ($9,000 - $16,000) / $4,000 = -1.75
As Z is less than -1.75, now we can see that the probability from the Z-table is 4% for -1.75.
Hence the probability of cash flow below $9,000 is 4%.
Which of the following statements is true of the new product development process? Question 8 options: 1) Commercialization is the process of inviting broad communities of people such as customers, employees, and scientists into the new product innovation process. 2) The purpose of the idea screening stage is to create a large number of ideas. 3) The concept testing stage is the stage at which the product and its proposed marketing program are introduced into realistic market settings. 4) Under the business analysis stage, if the new product satisfies the company's objectives, the product then moves to the product development stage. 5) A product concept is the way consumers perceive an actual or potential product.
Answer: 4) Under the business analysis stage, if the new product satisfies the company's objectives, the product then moves to the product development stage.
Explanation:
The Business Analysis stage of the New Product Development Process is a more in-depth analysis of the product to find out the viability of the product in the market and what it means for the firm.
Here the big questions are asked such as;
The Cost of the product to produceIf adequate profit will be generatedProjected market demandExisting competitors etcOnce these questions have been answered and other analysis made and the company is satisfied, the product can then move to the Product Development Stage.
It is true that under the business analysis stage, if a new product satisfies the company's objectives, it moves to the product development stage.
In a New Product Development Process, the Business Analysis stage entails in-depth analysis of the product to find out the viability of the product in the market and what it means for the firm.
The questions asked in the Business Analysis stage includes:
The Cost of the product to produce If adequate profit will be generated Projected market demand Existing competitorsIn conclusion, it is true that under the business analysis stage, if a new product satisfies the company's objectives, it moves to the product development stage.
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Often the life of a whistleblower involves tremendous ridicule and scrutiny from others, despite doing the "right thing." Describe your views as to why whistleblowers face tremendous obstacles as a result of bringing the inappropriate actions of otehrs to light.
Answer:
Find the explanation below.
Explanation:
Whistleblowing is the act of raising an alarm over unethical or illegal acts committed by people holding political or public service positions. The whistleblower is most times motivated by the quest to end the injustice or negative impact suffered by the disadvantaged group. Whistleblowers suffer tremendous obstacles from the people they have exposed because;
1. The offender's source of illegal income has been withdrawn. Just like humans fight for survival when their source of livelihood is taken away, so would a person fight against whatever that tends to take away their illegal source of wealth.
2. Fear of being seen in a negative light by others. The person committing a crime usually puts up an act of innocence, thus presenting himself as a morally upright person. When the whistleblower tries to expose their true identity, it is only expected that they would try to shut him up.
A brand manager for a certain company must determine how much time to allocate between radio and television advertising during the next month. Market research has provided estimates of the audience exposure for each minute of advertising in each medium, which it would like to maximize. Costs per minute of advertising are also known, and the manager has a limited budget of
Answer:
Optimization
Explanation:
Since we were told that the brand manager has limited budget of $25,000 which makes the manager to decide that television adverts is much more effective than radio adverts making him to allocates, at least 70% of the time to television, based on this I wiill run OPTIMIZATION test reason been that optimization will help and enable me to make the best or most effective use of available resource which will in turn Reduce costs while improving the performance which is why the brand manager decide to allocate 70% to Television in order to make the business more efficient as well as cost effective.
Entity A supplies planed timber, paint, varnish, springs, upholstery, and cushioning to Entity B, which produces a ready to use furniture. Entity C is the marketing department of Entity B. In this context, ______.
Answer:
A is an upstream supply chain member while C is the downstream chain member
Explanation:
There are two portions of the supply i.e downstream and upstream. In the upstream it reflects the suppliers of the organization and its process for managing the relation
While on the other hand the downstream reflects the process for distribution and delivery of products to the customers T
Therefore in the given case, Entity A is upstream while the Entity C is downstream
"PowerSurge, a company selling batteries in a monopolistically competitive market, collected the data below of revenues and costs. Assuming the firm is producing at the profit-maximizing level of output, calculate total profit for PowerSurge."
Answer:
Since the firm is maximizing its profit, it is producing and selling 40 units at $30 per unit, resulting in a net profit of $440.
Explanation:
Sine there is no information, I searched for a similar question:
Q Sales revenue Total costs Profit
10 $450 $340 $110
20 $800 $480 $320
30 $1,050 $620 $430
40 $1,200 $760 $440
50 $1,250 $900 $350
60 $1,200 $1,040 $160
70 $1,050 $1,180 -$130
80 $800 $1,320 -$520
90 $450 $1,460 -$1,010
TB MC Qu. 6-75 Kuzio Corporation produces and ... Kuzio Corporation produces and sells a single product. Data concerning that product appear below: Per Unit Percent of Sales Selling price $ 150 100 % Variable expenses 75 50 % Contribution margin $ 75 50 % The company is currently selling 6,500 units per month. Fixed expenses are $184,000 per month. The marketing manager believes that a $7,800 increase in the monthly advertising budget would result in a 190 unit increase in monthly sales. What should be the overall effect on the company's monthly net operating income of this change
Answer:
Effect on income= $6,450 increase
Explanation:
Giving the following information:
Contribution margin= $75
The marketing manager believes that a $7,800 increase in the monthly advertising budget would result in a 190 unit increase in monthly sales.
To calculate the effect on income, we need to use the following formula:
Effect on income= increase in contribution margin - increase in fixed costs
Effect on income= 190*75 - 7,800
Effect on income= $6,450 increase
Colgate-Palmolive Company reports the following balances in its retained earnings.
($ millions) 2010 2009
Retained earnings $14,329 $13,157
During 2010, Colgate-Palmolive reported net income of $2,200 million.
a. Assume that the only changes affecting retained earnings were net income and dividends. What amount of dividends did Colgate-Palmolive pay to its shareholders in 2010?
b. This dividend amount constituted what percent of its net income? (Round your answer to one decimal place.)
Answer:
a. $1,028 million
b. 46.7%
Explanation:
a. Dividends are taken from the retained earnings and net income is added to the retained earnings. The formula for ending retained earnings is;
Ending retained earnings = Opening Retained earnings + Net Income - Dividends
14,329 = 13,157 + 2,200 - Dividends
Dividends = 13,157 + 2,200 - 14,329
Dividends = $1,028 million
b. Dividends as a percentage of income
= 1,028/2,200
= 0.467
= 46.7%
What is International trade also list the importance of International trade.
Answer:
International trade is buying and selling goods and services across international boundaries. International trade plays a very good role in economic activities and performance of countries around the world. International trade benefit countries in many ways: 1- increasing in production and consumption as a result of specialization, 2- greater choices for consumers due to the competition between traders to get the best choice for consumers. 3- lower prices 4- trade is great source for the flow of service and technology. International trade is the engine of growth.
Suppose the price level and value of the U.S. Dollar in year 1 are 1 and $1, respectively. Instructions: Round your answers to 2 decimal places. a. If the price level rises to 1.35 in year 2, what is the new value of the dollar?
Answer:
0.74
Explanation:
Data provided in the question
Price level = 1.35
According to the given situation, the computation of the new value of the dollar is shown below:-
The New value of the dollar = 1 ÷ Price level
= 1 ÷ 1.35
= 0.74074
or
= 0.74
Therefore for computing the new value of the dollar we simply applied the above formula.
Waterway has a standard of 2 hours of labor per unit, at $12 per hour. In producing 3800 units, Waterway used 7350 hours of labor at a total cost of $89670. Waterway's labor quantity variance is
Answer:
Direct labor time (efficiency) variance= $3,000 favorable
Explanation:
Giving the following information:
Standard= 2 hours of labor per unit, at $12 per hour.
In producing 3800 units, Waterway used 7350 hours of labor.
To calculate the direct labor quantity variance, we need to use the following formula:
Direct labor time (efficiency) variance= (Standard Quantity - Actual Quantity)*standard rate
Standard quantity= 2*3,800= 7,600 hours
Direct labor time (efficiency) variance= (7,600 - 7,350)*12
Direct labor time (efficiency) variance= $3,000 favorable
1. The Lounge Company manufactures slippers and sells them at $10 a pair. Variable manufacturing cost is $4.75 a pair, and allocated fixed manufacturing cost is $0.75 a pair. It has enough idle capacity available to accept a one-time-only special order of 30,000 pairs of slippers at $5.50 a pair. Lounge will not incur any marketing costs as a result of the special order. What would the effect on operating income be if the special order could be accepted without affecting normal sales: (a) $0, (b) $22,500 increase, (c) $142,500 increase, or (d) $165,000 increase? Show your calculations. 2. The St. Paul Company manufactures Part No. 498 for use in its production line. The manufacturing cost per unit for 25,000 units of Part No. 498 is as follows:
Answer:
1. The Lounge Company
The effect on operating income be if the special order could be accepted without affecting normal sales:
(b) $22,500 increase
2. Manchester
Explanation:
1. The Lounge Company:
Selling price = $10 per pair
Variable manufacturing cost = $4.75 per pair
Allocated fixed manufacturing cost = $0.75 per pair
Total manufacturing costs = $5.50
Special order of 30,000 pairs
Price of special order = $5.50 per pair
Sales value of special special order = $165,000 (30,000 x $5.50)
Manufacturing cost for special order:
Based on full cost = $165,000 (30,000 x $5.50)
Based on variable cost = $142,500 (30,000 x $4.75)
Contribution = $22,500 ($165,000 - $142,500)
The special order will not bring about any increase in operating income if the full cost is used to determine the net income. If, however, the variable cost is used, considering that The Lounge Company has idle capacity, then there is a contribution of $22,500 to the operating income.
John is considering purchasing a commercial building. His accountant is working with him to determine the property’s value to John. The initial cost of an investment property plus the cost of any additional improvements less qualified deductions represents the:
Answer:
Adjusted basis
Explanation:
Adjusted basis in accounting is used to calculate the net value of an asset. This is done by reducing depreciation deductions from the original value and adding capital expenses like cost of improvement.
This method is best used when there is need to get accurate gain and loss records, and for tax purposes.
In the given scenario John's accountant is using the adjusted basis when he calculates initial cost of an investment property plus the cost of any additional improvements less qualified deductions
30-year maturity bond with face value of $1,000 makes semiannual coupon payments and has a coupon rate of 8%. (Do not round intermediate calculations. Enter your answers as a percent rounded to 3 decimal places.) a. What is the yield to maturity if the bond is selling for $900?
Answer:
The answer is 15.508%
Explanation:
The annual coupon rate is:
8% x 900 x 2 / $1,000 = 14.4%
The yield to maturity as follows:
Yield to maturity (YTM) = [Coupon payment + (Face Value - Present Value) / Time to Maturity] / [(Face Value + Present Value) / 2]
=> YTM = [14.4% x $1,000 + ($1,000 - $900) / 30] / [ ($1,000 + $900) / 2] = 15.508%
"At that time, the market price of ABC is $44. If the market rises to $58 and the call is exercised (the put expires out the money), the gain or loss is:"
Answer:
600 loss
Explanation:
The computation of the gain or loss is shown below:
Since on Jan, there is a put option of 45 at $3 and the market rises to $58
So it losses by 13 points i.e
= 45 - 58
= 13
Now the total premium points collected is of 7 i.e
= 4 + 3
= 7
So, the remaining points left is
= 13 - 7
= 6
So for 6 points, the net loss is $600
Zane, a new employee, is eager to get a promotion soon, and he hopes he can quickly rise through the ranks at the company. He decides to ask his supervisor, Mary, for professional development advice. This is an example of which of the following types of communication?
a. Downward
b. None of these are correct.
c. Upward
d. Horizontal
e. Diagonal
Answer:
C
Explanation:
Upward communication is communication from lower hierarchy in the organisation to higher hierarchy in the organisation
Downward communication is communication from higher hierarchy in the organisation to lower hierarchy in the organisation
Horizontal communication is communication within the same organisation hierarchy
Diagonal communication is cross functional communication between employees at different levels of the organisation
Digby's turnover rate for this year is 6.33%. This rate is projected to remain the same next year and no further downsizing will occur from automating. What would the total recruiting cost be for Digby, assuming it spends the same amount extra above the $1,000 recruiting base as they did this year?
Answer:
Total recruitment cost = $316.5
Explanation:
Note:
Given question is incomplete,
The number of employees = 5,000
Given:
Turnover rate for this year = 6.33%
Find:
Total recruitment cost
Computation:
Total recruitment cost = Turnover rate for this year × The number of employees
Total recruitment cost = 5,000 × 6.33%
Total recruitment cost = $316.5
The total recruiting cost will be $316.5 for Digby.
Given information
Assumed the number of employees is 5,000
Turnover rate for this year = 6.33%
Total recruitment cost = Turnover rate for this year * The number of employees
Total recruitment cost = 5,000 * 6.33%
Total recruitment cost = $316.5
Therefore, the total recruiting cost will be $316.5 for Digby.
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Which of the following costs should not be included in product costs for internal management reports that are used for decision-making?
Answer: d. Cost of organization sustaining activities
Explanation:
Organization sustaining activities are those undertakings that have to be made if a company can keep operating. Examples include; property taxes, insurance, information filing with Government agencies and etc.
These activities are therefore not directly linked to the production process as they are not related to a single product and so should not be included in product costs for internal management reports which will be used for decision-making.
Which of these does NOT describe a friction that might prevent firms from choosing the optimal level of capital? A. Making too big of a change can be more expensive than making a few smaller changes. B. A firm might not be able to borrow enough to pay for the investments it wants to make. C. The firm likes its workers and doesn’t want to replace some jobs with machinery. D. Some capital is very specialized and cannot be re-sold in cases of economic downturns.
Answer:
C. The firm likes its workers and doesn’t want to replace some jobs with machinery.
Explanation:
Optimal level of capital simply refers to an ideal strategy used by a firm to raise capital. For example, a firm may decide between debt financing or equity financing, depending on the company's desired level of capital.
So, an already operational firm with that likes its workers and doesn’t want to replace some jobs with machinery has no direct relationship with its level of capital.
At January 1, 2019, the Accrued Warranty Payable is . During 2019, the company recorded Warranty Expense of . During 2019, the company replaced defective products in accordance with product warranties at a cost of . What is the Accrued Warranty Payable at December 31, 2019?
Answer: A.$8,800
Explanation:
The Accrued Warranty Payable Balance for the year ending December 2019 will take into account the Warranty expenses that were old less the warranty expenses that have been paid for already with the formula;
= Opening Accrued Warranty payable + Warranty Expense recorded for the Year - Warranty Expenses Paid in the year
= 1,800 + 19,400 - 12,400
= $8,800
Answer:
jus 2 ez pz lemon squeezey ppppppp
Explanation:
How would you make a convincing case that open trade in goods and services as well as free flow of foreign direct investment will enhance the well-being of (a) consumers, (b) pro-ducers, and (c) the government of countries? Give specific examples to prove your position.
Answer:
(a) consumers
Consumers are those who benefit the most from open trade and foreign direct investment. This is because these two economic policies increase the producion and delivery of goods and services, making them cheaper.
(b) producers
While some producers would be affected by open trade, most producers would benefit. Firms are allowed to specialize in producing those goods and services for which they have a competitive advantage, and they can also profit from increased foreign investment.
(c) the government of countries
Governments also benefit from these economic policies. They higher well-being of society means more government credibility, and the higher economic growth means more government revenue in the form of taxes.
The case that open trade in goods and services, as well as free flow of foreign direct investment, should be described below:
Consumers, producers, and government:Consumers are those who benefit the most from open trade and foreign direct investment. While some producers would be affected by open trade, most producers would benefit. Governments also benefit from these economic policies. The higher well-being of society means more government credibilitylearn more about the investment here: https://brainly.com/question/16822436?referrer=searchResults
g Once supply side effects are taken into account, tax cuts for labor income can change i. the supply of labor ii. potential GDP. iii. the growth rate of potential GDP.
Answer:
i, ii
Explanation:
a Tax is a compulsory sum levied by the government on income, goods or services. A tax cut would increase the supply of labour. As a result, the supply of labour would increase. As a result of the increase in labour, there would be an increase in potential GDP
A local county is considering purchasing some dump trucks for the trash pickups. Each truck will cost $55,000 and have an operating and maintenance cost that starts at $18,000 the first year and increases by $3,000 per year. Assume the salvage value is $12,000 at the end of 5 years and the interest rate is 10%. The equivalent annual cost of owning and operating each truck is most nearly equal to
Answer:
35,972
Explanation:
The equivalent annual cost can be calculated dividing NPV by the annuity factor
In order to find NPV first
Year1 Year2 Year3 Year4 Year5 Total
Operating and
Maintenance 18000 21000 24000 27000 30000 -
Discount factor(10%) 0.909 0.826 0.751 0.683 0.620 -
Discounted CFs 16362 17346 18024 18411 18600 88,713
Salvage 12000
Discount factor(10%) 0.620
Discounted salvage 7440 (7440)
Inital Cost (55,000) (55,000)
NPV 136,333
Calculation for EAC
NPV = 136,333
Annuity factor for 5 years = 3.790
Equivalent annual cost = NPV /Annuity factor
Equivalent annual cost = 136,333/3.790
Equivalent annual cost = 35,972
A company reports merchandise inventory on December 31 at $250,000 but LCM applied to items is $200,000. Record the journal entry to report merchandise inventory at the correct amount:
Answer:
The adjusting journal will be :
Loss on write down of Inventory $50,000 (debit)
Inventory $50,000 (credit)
Explanation:
The inventory must be presented at the Lower of Cost and Market Value.
The adjusting journal will be :
Loss on write down of Inventory $50,000 (debit)
Inventory $50,000 (credit)
The Loss on write down of Inventory is an expense in the trading account.
Answer:
See journal below
Explanation:
The journal entries below will be recorded in the books of account in order to report the merchandise inventory at the correct amount.
The cost of goods sold account Dr $50,000
($250,000 - $200,000)
To merchandise inventory account Cr $50,000
(Being record of inventory on LCM)
The cost of goods sold was debited with $50,000 while same amount was credited to merchandise inventory account.
The following data relate to factory overhead cost for the production of 10,000 computers: Actual: Variable factory overhead $262,000 Fixed factory overhead 90,000 Standard: 14,000 hrs. at $25 350,000 If productive capacity of 100% was 15,000 hours and the total factory overhead cost budgeted at the level of 14,000 standard hours was $356,000, determine the variable factory overhead controllable variance, fixed factory overhead volume variance, and total factory overhead cost variance. The fixed factory overhead rate was $6.00 per hour. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.
Answer:
Calculation of variable overhead controllable variance
Standard hours allowed for 10,000 computers = 14,000 hours
Budgeted variable expense = Standard hours allowed * variable overhead rate
= 14,000 * ($25 - $6)
= $266,000
Variable overhead controllable variance = Actual variable overhead expense - Budgeted variable overhead expense
= $262,000 - $266,000
=$4,000 (Unfavorable)
Calculation of fixed overhead volume variance:
Applied overhead = Number of computers produced * Fixed overhead rate
= 10,000 * $6.00
= $60,000
Budgeted fixed overhead = $90,000
Fixed overhead volume variance = Budgeted fixed overhead - Applied fixed overhead
= $90,000 - $60,000
= $30,000 (Favorable)
Calculation of Total factory overhead volume variance:
Total factory overhead cost variance = Variable overhead controllable variance + Fixed overhead volume variance
= - $4,000 + $30,000
= $26,000 (Favorable)
Assume the Residential Division of KappyKappy Faucets had the following results last year:
Net sales $6,360,000
Operating income 636,000
Average total assets 5,300,000
Management's target rate of return 16%
What is the division's return on investment?
Answer:
12%
Explanation:
Calculation for the division's return on investment
Using this formula
Return On Investment = Operating income /Average total assets
Let plug in the formula
Return on investment= $636,000/$5,300,000
Return on investment= 0.12*100
Return on investment=12%
Therefore the division's return on investment will be $12%
The income statements for Federer Sports Apparel for 2022 and 2021 are presented below.
FEDERER SPORTS APPAR
Income Statement
For the Years Ended December 31
Year Increase Decrease
2019 2018 Amount %
Net sales 18,800,000 15,500,000
Cost of goods 13,200,000 7,000,000
Gross prof 5,600,000 8,500,000
Operating expenses 1,600,000 1,200,000
Depreciation expense 1,000,000 1,000,000
Inventory write-down 200,000 0
Loss (litigation) 1,500,000 300,000
Required:
Prepare a horizontal analysis for 2022 using 2021 as the base year.
Answer and Explanation:
The Preparation of horizontal analysis for 2022 using 2021 as the base year is prepared with the help of a spreadsheet.
Horizontal analysis is a method for the analysis of financial statements that indicates fluctuations in the amount of the related products over a period of time. It is a valuable instrument for determining trend situations.
So, with the help of the spreadsheet, we will be able to find the net income by using the formulas.
The horizontal analysis of the Income Statement is the analytical form of preparing the income statement to determine the accurate amount and percentage of changes in each item of the income statement.
The horizontal income statement is attached below.
The horizontal analysis determines the change in the amounts of each account. The percentage change is the division of a change in amount by the base amount of the base year.
In this case, the base year was 2021.
Therefore, the change in amounts will be determined based upon the figures of the base year.
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Cost of common stock: Whitewall Tire Co. just paid a $1.60 dividend on its common shares. If Whitewall is expected to increase its annual dividend by 2 percent per year into the foreseeable future and the current price of Whitewall common shares is $11.66, what is the cost of common stock for Whitewall
Answer:
Cost of common stock for Whitewall is 16.00%
Explanation:
Ke = D1 / Price +g
D1 = Ke (Price + g)
D1 = $1.60 * (1+0.02)
D1 = $1.60 * (1.02)
D1 = $1.632
Ke = D1 / Price +g
We solve for Current dividend to derive the Cost of common stick
Ke = 1.632 / (11.66) + 2%
Ke = 1.632 / 11.66 + 0.02
Ke = 0.139966 + 0.02
Ke = 0.159966
Ke = 15.9966%
Ke = 16.00%
Identify the type of cash flow activity for each of the following events (operating, investing, or financing): a. Redeemed bonds be. Issued preferred stock c. Paid cash dividends d. Net income e. Sold equipment f. Purchased treasury stock go. Purchased patents h. Purchased buildings i. Sold long-term investments j. Issued bonds k. Issued common stock
Answer is given below
Explanation:
type of cash flow activity
a. Redeemed bonds ---------------Fiancing
b Issued preferred stock -----------Fiancing
c. Paid cash dividends --------------Fiancing
d. Net income --------------------------Operating
e. Sold equipment --------------------Investing
f. Purchased treasury stock -------Fiancing
g. Purchased patents ----------------Investing
h. Purchased buildings -------------Investing
i. Sold long-term investments ----Investing
j. Issued bonds ------------------------Fiancing
k. Issued common stock -----------Fiancing
Lilliput is a country that has closed borders and does not import or export any goods or services; hence, they do not worry about trade with other countries.
Total spending for the federal government of Lilliput for the last fiscal year was $1.06 billion. The country collected $1.05 billion in taxes during this same fiscal year. Assume government transfers were zero. Based on this information, what is Lilliput's budget balance? In the last fiscal year, Lilliput was running:______.
a. a budget surplus.
b. a balanced budget.
c. a budget deficit.
Answer: budget deficit
Explanation:
From the question, we are informed that the total spending for the federal government of Lilliput for the last fiscal year was $1.06 billion and that the country collected $1.05 billion in taxes during this same fiscal year.
Since the expenditure of $1.06 billion is more than the revenue of $1.05 billion, this show that there was a budget deficit.
g If the risk-free rate is 5%, return on the market is 8%, and beta is 0.5, a stock with a return of 7% is likely: Group of answer choices Correctly valued Undervalued None of the options Overvalued
Answer:
The stock is undervalued. As the required rate of return (6.5%) on market is less than the actual return (7%), the stock is said to be undervalued as it provides an actual return greater than the required rate of return.
Explanation:
To check if a stock is over valued, undervalued or correctly valued, we simply compare the required rate of return on a stock as measured by CAPM with the actual return on the stock.
We can calculate the required rate of return using CAPM equation. The formula for required rate of return under CAPM is,
r = rRf + Beta * (rM - rRF)
Where,
rRf is the risk free raterM is the return on marketr = 0.05 + 0.5 * (0.08 - 0.05)
r = 0.065 or 6.5%
As the required rate of return on market is less than the actual return, the stock is said to be undervalued as it provides an actual return greater than the required rate of return.
Answer:
Undervalued
Explanation:
to determine if the stock is overvalued or undervalued, we have to determine the expected rate of return using the CAPM and compare it with the return of the stock
Expected rate of return = risk free + beta x (market rate of return - risk free rate of return)
5% + 0.5(8% - 5%) = 6.5%
the stock is undervalued because 6.5% is less than 7%
