when computing economic profit we assume that capital earns a nominal rate of return/avg rate of return
option B is the correct answer ie. average rate of return
When computing economic profit, we assume that capital earns a: O A Zero rate of return....
a firm earns zero economic profit when? A) price is equal to average variable cost B) price is equal to average total cost C)price exceeds average total cost by the greatest amount D)marginal revenue is equal to marginal cost
Choose the correct answer and explain briefly 8. What is the expected return of a zero-beta security? A. Market rate of return. B Zero rate of return. C. Negative rate of return. D. Risk-free rate of return 9. Capital asset pricing theory assets that portfolio returns are best explained by: A. Economic Factors B. Specific risk C. Systematic risk I D. Diversification 10. According to CAPM, the expected rate of return of a portfolio with a beta of 1.0 and...
Assume the following for ABC corp. Net Operating Profit (before taxes) = $10,000 Cash Operating Taxes = $3,000 WACC = 6% Total Investment Capital = $200,000 Please calculate the following: Capital Charge Economic Value Added and Return on Invested Capital (ROIC) 3) Capital Charge A: $600 B: $180 C. $420 D. $12,000 E. NONE OF ABOVE (what is the correct answer.) 4) Economic Value Added A. $7,000 B. $1,000 C. $13,000 D. $187,000 E. NONE OF ABOVE (what is the correct answer.) 5) Return on Invested Capital (ROIC) A. 3.5% B. 6% C. 5% D. 1.5% E. NONE OF ABOVE (what...
The diagram on the right shows a firm (industry) that earns a normal return to capital if organized competitively. Please answer all questions e market place is P under competition. We assume at first hat marginal cost is fixed at $40 per unit of output and there are no economies or diseconomies of scale revenue for the competitive firm, assuming free entry, is S(Enter your response as an integer.) cost to the competitive firm, assuming free entry, is $ (Enter...
Assume the risk-free rate is 3% and the market return is 8%. According to the Capital Asset Pricing Model (CAPM), what is the return of a stock with beta of 1.4? 15.8% 8.0% 11.0% 7.8% None of the above.
1. Zero economic profit means that The firm breaks down The firm makes just normal profits The firm must close down The firm must raise the price of the commodity All of the above 2. Normal Profit is: The opportunity cost of capital committed in a certain line of business The profit any firm makes in the market The minimum capital return required in order to stay in a certain type of business (a) and (c) All of the above...
Consider a market where there are many firms with different cost structures. When determining which firms enter the market first, we look at OA. fixed costs. O B. average variable cost. O C. marginal cost. O D. average total cost. The last firm to enter earns O A. positive economic profits O B. the greatest economic profits. ° C. zero economic profits. 0 D. average economic profits. If demand shifts to the left (decreases), the last firm t that entered...
According to the Capital Asset Pricing Model (CAPM), fairly-priced securities have o zero alphas. o positive alphas. o negative betas. o positive betas. QUESTION 8 Given the table below, what is the risk-free rate? Portfolio L (low risk) M(medium risk) H (high risk) Risk Premium 2% 4 8 Expected Return 7% 9 Risk (SD) 5% 10 20 6%. O 9%. O 7%. O 1%. 5%.
answer all. For the next question, assume an investor with the following utility function U-E)-3/2) 12. To maximize her expected uility, she would choose the set with an espect rate of return of and a standard deviation ofrspectively A. 1296; 20% B. 10%; 15% C. 1056; 1056 D, 8%, 10% Е.none ofthe above 13. Which of the following statements regarding the Capital Allocation Line (CAL) false? A. The CAL shows risk-return combinations. B. The slope of the CAL equals the...
1- Changes in the ________ probably do not affect the required rate of return by investors. a. risk-free rate b. money supply c. risk premium d. budget deficit e. All of these choices affect the required rate of return. 2- Which of the following is not a reason for bank failures? a. fraud b. liquidity crisis c. increased competition d. a low loan default percentage e. All of these choices are reasons for bank failures. 3- The risk premium on...