Answers
Answer:
(ii) economic profits are zero
Explanation:
A perfect competition is characterised by many buyers and sellers of homogenous goods and services. Market prices are set by the forces of demand and supply. There are no barriers to entry or exit of firms into the industry.
In the long run, firms earn zero economic profit. If in the short run firms are earning economic profit, in the long run firms would enter into the industry. This would drive economic profit to zero.
Also, if in the short run, firms are earning economic loss, in the long run, firms would exit the industry until economic profit falls to zero.
I hope my answer helps you
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Answers
Answer:
Cost of Equity 8.794%
Explanation:
We can solve for the cost of equity using the CAPM
risk free 0.0291
premium market = market rate - risk free 0.071
beta(non diversifiable risk) 0.88
Ke 0.09158 = 9.158%
Or using the gordon dividend grow model
D= 3.57
return = ?
growth 0.0325
stock = 68.91
we solve for return:
return = 0,08430670 = 8.43%
Now we have two diferent rates, so we can do an average to get the best estimate cost of equity
(9.158 + 8.43)/2 = 8.794%
Final answer:
The company's cost of equity, based on provided data points and the Capital Asset Pricing Model (CAPM), is calculated to be 9.14% annually.
Explanation:
Cost of equity is typically estimated using the Capital Asset Pricing Model (CAPM). Under the CAPM, the cost of equity is a function of the risk-free interest rate, the equity's beta, and the expected market risk premium. In this case, we can substitue the given values into the CAPM equation, which is: Cost of Equity = Risk-free rate + Beta * Market Risk Premium. Therefore, the company's cost of equity can be calculated as: Cost of Equity = 2.91% + 0.88 * 7.10% = 9.14%. As for the dividends, they are growing at a rate of 3.25% annually, but they are not directly contributing to the company's cost of equity.
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Answers
Answer:
Price of stock=$ 77.88
Explanation:
The Dividend Valuation Model is a technique used to value the worth of an asset. According to this model, the worth of an asset is the sum of the present values of its future cash flows discounted at the required rate of return.
The price of the stock will the sum of the present value of the growing annuity and the growing perpetuity
Present value of dividend from year 1 to 8
The PV of the growing annuity = A/r-g) ( 1- (1+g)/(1+r)^n )
A- dividend payable now , r- required of return, g-growth rate, number of years
PV = (2.30×1.23)/(0.15-0.23)× (1- (1.23/1.15)^8) = 25.199
PV of Dividend from year 9 and beyond:
P = D× g/(r-g)
This will be done in two steps:
Step 1: PV(in year 8)of dividend = 2.30× 1.23^8×1.07/(0.15-0.07) = 161.16
Step 2 : PV in year 0 = 161.16× 1.15^(-8)= 52.684
PV of Dividend from year 9 and beyond = 52.684
Price of stock = 25.19 + 52.68= 77.88
Price of stock=$ 77.88
Answers
Answer: labor
Explanation:
Answers
Answer:
The answer is True
Explanation:
Answers
B)Each worker is paid a wage equal to the highest value of the marginal product of labor(i.e., $40).
C)Each worker is paid $15.
D)We need to know the product price before we can figure out the wage rate.
Answers
Answer: A. In equilibrium, each worker is paid is or her value of marginal product of labour.
Explanation:
Marginal productivity of income distribution refers to the additional revenue derived from the marginal unit of product produced and that wages should be equal to the marginal revenue derived from the production of additional or marginal product and this is achieved at equilibrium.
The theory also implies that workers should not be paid below or above the marginal revenue derivable from marginal product which implies they cannot be paid $15 or $40, moreover the product price is not a determinant of wages rate.
Final answer:
In equilibrium, each worker is paid his or her value of the marginal product of labor.
Explanation:
According to the marginal productivity theory of income distribution, wages are determined by the marginal product of labor. Therefore, the correct answer to your question is option A: In equilibrium, each worker is paid his or her value of the marginal product of labor. In the context of your question, this means Noe is paid $40, Barbara $35, Calvin $27, and Diana $15, reflecting each's respective marginal productivity.
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