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The Abacus Computer Company has decided to use the Capital Asset Pricing Model to estimate its cost of equity. The firm's beta was estimated at 1.4. The S&P/TSX Composite-stock index has returned 12.5% to investors over a fairly long period of time, and Abacus has decided to use this value as the market return. Treasury bills are currently providing investors with a 6.5% yield.
Question 1: Calculate Abacus's cost of equity using the CAPM.
Question 2: If its beta was incorrectly estimated, and a new revised estimate of 1.8 was used in the calculations, what would its new estimate of the cost of equity be?
The cost of the ending work in process is:
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Heely Company manufactures a product that sells for $50 per unit. Heely incurs a variable cost per unit of $35 and $2,400,000 in total fixed costs to produce this product. They are currently selling 200,000 units.
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