Population model of the effect of return on assets

Assignment Help Financial Management
Reference no: EM131847792

Suppose the following is the true population model of the effect of Return on Assets (ROA) on CEO salary: Annual CEO Salary = β0 + β1Annual ROA + u. Further, suppose that the sample average CEO Salary is $525,000 and the sample average Annual ROA is 10% (assume that in your data Annual ROA is reported in percent form, not in decimal form). Finally, suppose your estimate of β0 is 230,000.

(a) What must your OLS estimate of β1be? Show your calculations.

(b) If Richard Smith, the CEO of XYZ Inc. has earned an annual salary of $800,000 this year and XYZ Inc’s ROA is 12% this year what is the value of u for Richard Smith?

Reference no: EM131847792

Questions Cloud

What''s the future value of ordinary annuity : What's the future value of a 4%, 5-year ordinary annuity that pays $100 each year? what would its future value be?
Special allocation of income to Maria be respected by IRS : Ignoring all other partnership items, will the special allocation of income to Maria be respected by the IRS? Why or why not.
Report the effects of the negative translation adjustment : How should Bertrand report the effects of the negative translation adjustment and foreign exchange gain in its consolidated financial statements?
Considering an investment that offers net cash flow : A company is considering an investment that offers a net cash flow of $100,000 per year for the indefinite future.
Population model of the effect of return on assets : Suppose the following is the true population model of the effect of Return on Assets (ROA) on CEO salary: Annual CEO Salary = ß0 + ß1Annual ROA + u.
Expected inflation rate-current nominal interest rate gaps : Suppose that expected inflation in the U.S. is 1.9% and the expected inflation rate in China is 1.8%. Current Nominal Interest Rate Gaps
Cash flows in current dollars and in constant dollars : Construct a cash flow table showing cash flows in current dollars and in constant dollars (
Find the number of payments : A couple buys a $150000 home, making a down payment of 19%. If the couple decides to increase the monthly payment to $900, find the number of payments. ?
What is the required rate of return on stock with beta : Assume that the risk-free rate is 5.5% and the required return on the market is 10%. What is the required rate of return on a stock with a beta of 0.9?

Reviews

Write a Review

Financial Management Questions & Answers

  Two independent projects with the cash flows

You are considering two independent projects with the following cash flows. The required return for both projects is 10%. Given this information, which one of the following statements is correct? You should accept project B since it has the higher IR..

  Material ordering costs-labor costs and credit sales

Write a memo to your supervisor explaining the cash conversion cycle at your company, a manufacturer of plastic toys. Be sure to address the following: Material ordering costs, Labor costs, Credit sales (accounts receivables)

  What is the simple npv of each project

What is the simple NPV of each project? - What is the NPV(N, co) of each project? - What is the annual equivalent value of each project?

  One-year forward exchange rate

what must be the one-year forward exchange rate?

  The shorter the time period that funds are invested

The shorter the time period that funds are invested, the greater the future value, so long as the interest rate is positive. The lower the discount rate that funds are invested at, the greater the future value.

  Assume semiannual coumpounding periods

You purchased a zero-coupon bond one year ago for $277.33. The market interest rate is now 8 percent. Assume semiannual coumpounding periods. If the bond had 17 years to maturity when you originally purchased it, what was your total return for the pa..

  The perspective of social corporate responsibility

identify alternative courses of action from the perspective of social corporate responsibility and an ethical framework, system,

  Financial crisis is a crisis with its origins

The Global Financial Crisis is a crisis with its origins in the banking system in the United States

  Purchased the bond today and held it until maturity

Fresh Fruit, Inc. has a $1,000 par value bond that is currently selling for $1,005. It has an annual coupon rate of 9.34 percent, paid semiannually, and has 29-years remaining until maturity. What would the annual yield to maturity be on the bond if ..

  Difference between ebit and taxable income

The difference between EBIT and taxable income must be the interest expense.

  How much will you pay for the company stock today

Take Time Corporation will pay a dividend of $4.40 per share next year. The company pledges to increase its dividend by 5.75 percent per year, indefinitely. If you require a return of 10 percent on your investment, how much will you pay for the compa..

  What is the stock expected price three years from today

If its required return is 15%, what is the stock's expected price 3 years from today?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd