Percentage of sales approach:. Q 1:12,000 /.75=16,000; Full capacity as % increase 16,000/12,000 = 1.33 . Income statement Sales $ 12,000 Costs $9,800 N I $2,200 Ret earnings 2,200*.75=1,650. New ret earnings 1,650*1.33=2,195.5
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1. What would be sales at full capacity? (1p)
2. What is the capital intensity ratio at full capacity? (1p)
3. What is EFN at full capacity and Dividend payout ratio is 25%?(ignore accounts payable) (1p)
Expected return = return on a risky asset expected in the future
Portfolio = a group of assets held by an investor
Portfolio weights = Percentage of a portfolio’s total value in a particular asset
Invest 60% of your money in Asset A
Total return = Expected return + Unexpected return
Announcement = Expected part + Surprise
Total Return = expected return + systematic portion + unsystematic portion
Principle of diversification = spreading an investment across a number of assets eliminates some, but not all of the risk
Consider a portfolio consisting of asset A and a risk-free asset. Expected return on asset A is 20%, it has a beta = 1.6. Risk-free rate = 8%.
Slope = E(RM) – Rf = market risk premium