MINDTAP FINANCE FOR GARMAN/FORGUE'S PER
MINDTAP FINANCE FOR GARMAN/FORGUE'S PER
13th Edition
ISBN: 9781337288347
Author: FORGUE
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Chapter 2.1, Problem 4CC
Summary Introduction

To Explain: The reason as to why or why not the gig economy is freelancing or entrepreneurial.

Introduction:A gig economy is a situation where people engage in freelance work having more flexibility and autonomy. Rather than being engaged in a full-time conventional job, many people now a days engage in freelance work. It not only enables them to be more independent, but also earns them a better income as one person could be engaged in a number of freelancing activities.

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Scenario one: Under what circumstances would it be appropriate for a firm to use different cost of capital for its different operating divisions? If the overall firm WACC was used as the hurdle rate for all divisions, would the riskier division or the more conservative divisions tend to get most of the investment projects? Why? If you were to try to estimate the appropriate cost of capital for different divisions, what problems might you encounter? What are two techniques you could use to develop a rough estimate for each division’s cost of capital?
Scenario three: If a portfolio has a positive investment in every asset, can the expected return on a portfolio be greater than that of every asset in the portfolio? Can it be less than that of every asset in the portfolio? If you answer yes to one of both of these questions, explain and give an example for your answer(s). Please Provide a Reference
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