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Question - Mr. Anderson invested AU$200,000 in stock market in December 2019. He purchased 5,000 shares of ABC Company at AU$40 per share. Expected rate of return on ABC stock and S&P ASX300 were 14% and 12% respectively at the time of purchase. The rate on T-bill issued by Reserve Bank of Australia (RBA) was 4% in December 2019.
Mr. Andrew, neighbour of Mr. Anderson, claims that he is smarter than Mr. Anderson in stock market trading. He also invested AUD$200,000 in the shares of XYZ Company, which had an expected rate of return of 16%. Both Mr. Anderson and Mr. Andrew enjoy the same risk-free rate and market return (return on S&P ASX300). Use CAPM to answer this question (assume both shares are fairly priced).
(i) Who invested in the riskier share? Without any calculation explain your answer in words.
(ii) Now explain your answer in (a) above with numerical calculation (you must show all relevant workings).
Write a letter to Carmin explaining how you determined each deduction andany items you did not treat as a deduction. You should include a list of eachdeduction and its amount.
In recent years, it has been common for companies to experience significant stock price changes in reaction to announcements of massive layoffs. Critics charge that such events encourage companies to fire longtime employees and that Wall Street is ch..
Palmdale Corporation has a regular tax liability of $94,000. It is eligible for a $54,000 general business credit for the current year and has a $30,000 general business credit carryover from the prior year. a. What is Palmdale’s allowable general bu..
Mimi is the healthcare manager at a physical rehabilitation, How would you proceed in each situation? What information would you want to have, and why?
In February, one of the processing departments at Manger Corporation had beginning work in process inventory of $25,000 and ending work in process inventory of $34,000. During the month, $290,000 of costs were added to production and the cost of unit..
Prepare journal entries for Marcey Co. for: Accounts receivable in the amount of $1,000,000 were assigned to Utley Finance Co. by Mars as security for a loan of $850,000. Utley charged a 3% commission on the accounts; the interest rate on the note is..
In addition, the company had outstanding all year a 10%, 3-year, $4,000,000 note payable and an 11%, 4-year, $7,500,000 note payable. What are weighted-average accumulated expenditures?
What is the cost of equity for this company based on the constant growth dividend discount model? Consider a company whose stock currently trades
This land will be used as a larger site on which to train the dogs & cats - i.e., it'll be used as business land. How to journal entry this event?
Did the common buy back a significant amount of its shares in the current year? You can see this in the Statement of Stockholders' Equity as a reduction in shares.
If XYS PV of Cash Inflows is $34,000 and the PV of outflows is $40,200, what is the Profitability Index, and what is your conclusion?
Weber Corporation has 10 million shares of a preferred stock issue outstanding that pays a cumulative $6 annual dividend on a quarterly basis. However, due to poor profitability the company has not paid the preferred stock dividend for the last five ..
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