The following statements are factual discussions about Capitalization of EarningsMethod except:Select the correct response:You may use past earnings in the Capitalization of Earnings method forcases wherein earnings are fixed.In capitalization of earnings method, the value of the asset or theinvestment is determined using the anticipated earnings of the companydivided by the cost of capital.Cost of Capital used in the Capitalization of Earnings method isequivalent to the expected yield or the required rate of return.The formula used in Capitalization of Earnings is actually grossing upthe future earnings using capitalization rate to come up with theestimated asset value.

Introduction: Valuation is an essential process in finance and business that involves estimating the…

Answered: The following statements are factual…

Understanding Business

12th Edition

ISBN:9781259929434

Author:William Nickels

Publisher:William Nickels

Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment

Section: Chapter Questions

Problem 1CE

See similar textbooks

Similar questions

All financial institutions provide different financial products and services that expose them to different types of risks that require different risk mitigating practices and techniques. These risks include; credit risk liquidity risk, interest rate risk, market risk, foreign exchange risk, solvency risks, operational risks and model risk. Which of the following is not true about credit risk? Select one: a. Performance risk is similar to credit risk. The borrower´s performance on an operation or specific project determines the degree of transaction risk. b. Measures based on the credit quality of the debt. As ratings are ordinal measures, they are sufficient to value credit risk. c. The risk of the issuers and borrowers are evaluated in prices in a capital market setting and can be seen visibly, or through credit spreads, or as add-ons to the risk-free rate. d. Credit risk is similar to country risk, which is essentially the risk crisis in a country. Examples of…
Assume your home is assessed at $250,000. You have a $241,000 loan for 25 years at 6 percent. Your property tax rate is 1.4 percent of the assessed value. In year one, you would pay $15,665 in mortgage interest and $3,500 in property tax (1.4 percent on $250,000 assessed value). What is the total deduction you can take on your federal income tax return?
M-REITs, or mortgage REITs, primarily invest in real estate loans and mortgage-backed securities that are often below investment grade. When a mortgage REIT decided some years ago to re-securitize a substantial portion of its CMBS "BB" and "B" securities, it received surprisingly high investment grade ratings of "A" and "BBB" from Standard & Poor's on the new securities that were created from the cash flows of the underlying portfolio of non-investment grade rated securities. But when the financial markets began to fall a few months later, that mortgage REIT quickly went bankrupt and the value of its "A" and "BBB" investment grade rated re-securities fell substantially. The intended purpose of the ratings agencies is: To produce substantial profits for the rating agencies from the fees paid to them for giving higher ratings on investments than might otherwise be appropriate To help businesses and governments raise needed capital by providing them with the ratings they need to…
In the prospectus for the Brazos Aggressive Growth fund, the fee table indicates that the fund has a 12b-1 fee of 0.35 percent and an expense ratio of 1.55 percent that is collected once a year on December 1. Joan and Don Norwood have shares valued at $114,500 on December 1. What is the amount of the 12b-1 fee this year? What is the amount they will pay for expenses this year?
Please answer quickly and co
5. If money can be invested at 5% compounded annually, A. Accumulate P1,000 for 15 years. B. Discount the result of problem A for 10 years. C. Accumulate P1,000 for 5 years. Compare the results of B and C.
create a response to the followig The fixed budget is continual and constant, and under any given circumstances this budget will never change. A fixed budget is not flexible, and a fixed budget is very straightforward. When we look at the value of a fixed budget does not fluctuate based on increases or decreases in revenue, or if there is an increase in operating costs. The fixed budget’s value is determined once it is assigned to the balance sheet without change. A fixed budget will be assigned for a precise time that is shown in the organization’s budget plan (Van Baal &Meltzer 2016). The fixed budget does not show any unpredictability based on the organization’s activity (Van Baal &Meltzer 2016). When we look at a flexible budget, there is a huge difference. A flexible budget is defined as a budget based on the static budget assumptions but adjusted to reflect realized volume (Reiter & Song 2021). A flexible budget can and will be changed to meet the needs of the…
Which of the following statements is correct for the Black-Scholes model? A) The price of an American call written on a stock is: c = SN(d1)-Ke-rTN(d2) B) The stock price at a future point in time follows a log-normal distribution. C) The continuously compounded return on the stock follows a log-normal distribution. D) Black-Scholes prices may allow for arbitrage opportunities. Please explain and justify your choice.
help!
You are managing a business that design products for specific medical purposes. Your potential demand is very short lived and uncertain. Your production cycle is very long which means you need to have the products ready in advance. If the demand for your product arises (only 30% chance), they will be sold well; if not, the products will remain unsold, and you will need to liquidate them for 500 each. You predict that the demand will be normally distributed with mean= 15000 and standard deviation= 7000. The production cost of your product is, on average, $5500. You will sell your product for $12500. Suppose you make 18000 products, and you get lucky and demand will occur this year. What is your expected profit?
Harmony is the Senior accountant of a Bank. Junior accountants of all the branches reportto her. While preparing for the final quarter sales report, she finds that two out of the fourbranches have failed to achieve the sales targets for the second consecutive quarter.According to the company policy, the branches that fail to achieve targets in twoconsecutive quarters have to be closed. Harmony feels sad for all the people losing theirjobs and decides that she will overstate the sales revenue generated by every branch andreport manipulated figures in the financial statements. Answer the following questions. Describe Harmony’s actions from ethical standpoint. Is she doing the right thing? What can be the consequences of Harmony’s actions. What are the risks involved? What would you suggest to Harmony? Please note this is not an essay.
What is the relative tax advantage of corporate debt if the corporate tax rate is Tc=0.21 , the personal tax rate on interest is TpD=0.37 , but all equity income is received as capital gains and escapes tax entirely ( TpE=0 )? How does the relative tax advantage change if the company decides to pay out all equity income as cash dividends that are taxed at 20%? Note: Do not round intermediate calculations. Round your answers to 4 decimal places.

SEE MORE QUESTIONS

Recommended textbooks for you

Understanding Business

Management

ISBN:

9781259929434

Author:

William Nickels

Publisher:

McGraw-Hill Education

Management (14th Edition)

Management

ISBN:

9780134527604

Author:

Stephen P. Robbins, Mary A. Coulter

Publisher:

PEARSON

Spreadsheet Modeling & Decision Analysis: A Pract…

Management

ISBN:

9781305947412

Author:

Cliff Ragsdale

Publisher:

Cengage Learning

Understanding Business

Management

ISBN:

9781259929434

Author:

William Nickels

Publisher:

McGraw-Hill Education

Management (14th Edition)

Management

ISBN:

9780134527604

Author:

Stephen P. Robbins, Mary A. Coulter

Publisher:

PEARSON

Spreadsheet Modeling & Decision Analysis: A Pract…

Management

ISBN:

9781305947412

Author:

Cliff Ragsdale

Publisher:

Cengage Learning

Management Information Systems: Managing The Digi…

Management

ISBN:

9780135191798

Author:

Kenneth C. Laudon, Jane P. Laudon

Publisher:

PEARSON

Business Essentials (12th Edition) (What's New in…

Management

ISBN:

9780134728391

Author:

Ronald J. Ebert, Ricky W. Griffin

Publisher:

PEARSON

Fundamentals of Management (10th Edition)

Management

ISBN:

9780134237473

Author:

Stephen P. Robbins, Mary A. Coulter, David A. De Cenzo

Publisher:

PEARSON

SEE MORE TEXTBOOKS