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…

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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

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Suppose that $100 is invested at the beginning of a year. Which (if either) of the following methods of growing the investment results in a larger amount at the end of the year? (i) The investment grows at an interest rate of 4% per year, compounded continuously.(ii) The investment grows at an instantaneous growth rate of 4% per year. method (i) method (ii) Both methods produce the same amount.
1. Happy Carpet Cleaning Inc. collects FIT, OASDI and Medicare taxes from its employees by withholding them from their pay. However, Happy Carpet Cleaning Inc. does not pay these amounts to the Federal government when they are due. It waits until the end of the calendar year to pay them so that it can maximize its cash during the year. It believes that this practice does not affect its employees because it will be paying the taxes at the end of the calendar year to the Federal government. Is it right for Happy Carpet Cleaning Inc. to do so? Please comment on this practice.
Consider two equity market investors. The first investor is a hedge fund manager that relies on very active trading, and borrows from investment banks in order to leverage their investment. Their remuneration depends on total base fee earned by their fund as a percentage of net assets under management, plus a yearly bonus based on returns generated above a hurdle rate. The second investor is a high net-worth individual who is investing for their own retirement, which they anticipate to occur in 10 years or more. Identify three dimensions of risk that are likely to have significantly different impact on thesetwo investors. Explain the nature of the difference. Suggest aspects that each investor might monitor in order to control the risks most relevant to them.
Which of the following are important to investors evaluating direct participation programs? I. The economic soundness of the program II. The expertise of the general partner III. The basic objectives of the program IV. The start-up costs A I, II, and IV B I, II, and III C I, II, III, and IV D II, III, and IV
The usual face value for most corporate bonds is $5,000.; True or False
A restaurant borrows $15,200 from a local bank for 10 months. The local bank charges simple interest at an annual rate of 4.55% for this loan. Assume each month is 112 of a year. Answer each part below.Do not round any intermediate computations, and round your final answers to the nearest cent. If necessary, refer to the list of financial formulas . (a) Find the interest that will be owed after 10 months. $ (b) Assuming the restaurant doesn't make any payments, find the amount owed after 10 months.
Bruin Properties is in escrow to buy a 175,000 square foot shopping center in Camarillo, California for $35,000,000. Bruin Properties can borrow $24,000,000 fixed rate fully amortizing over 30 years at a 6.0% annual interest rate with equal monthly payments of principal and interest or it can borrow $28,000,000 fixed rate fully amortizing over 30 years at a 7.0% annual interest rate with equal monthly payments of principal and interest. What is the incremental annual borrowing cost for the additional $4,000,000 loan amount if each loan would be outstanding for the full 30 year term? a.13.0% b.12.4% c.11.5% d. 7.0%
I need typing clear urjent no chatgpt use i will give 5 upvotes i need all answers
The interest rate for the first five years of a $34,000 mortgage loan was 3.95% compounded semiannually. The monthly payments computed for a 10-year amortization were rounded to the next higher $10. (Do not round intermediate calculations and round your final answers to 2 decimal places.) a. Calculate the principal balance at the end of the first term. Principal balance $ b. Upon renewal at 6.45% compounded semiannually, monthly payments were calculated for a five-year amortization and again rounded up to the next $10. What will be the amount of the last payment? Final payment $
Which of the following ratios is INCORRECTLY defined? Seleccione una: a. TIE= EBIT/InterestExpense b. ROE=NetIncome/Equity c. Sales Growth=Sales-PreviousSales/PreviousSales d. Days Inventory= Inventory/AverageDailyCostOfGoodsSold e. ROA=(NetIncome+InterestExpense)/Assets
Cost benefit analysis is a complex approach that considers the cash flows or the value of money over a period of time. True or False
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