Explore BrainMass

Explore BrainMass

    Capital Budgeting and Financial Analysis Questions

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    1. What are the three factors that influence the required rate of return by investors? What two components make up the required rate of return on common stock?

    2. What is risk premium and what were the risk premium on stocks and the maturity premium on treasury bonds for the ten year period? How is this determined?

    3. What are some ethical considerations of accounting and finance? If you follow all applicable rules and regulations, are you an ethical person? Why do many business managers feel that ethical behavior is essential to the profitability and survival of their firm?

    4. What information does a company's cash flow statement provide that is not available from the other financial statements? Be specific and cite at lease one example.

    © BrainMass Inc. brainmass.com June 4, 2020, 1:36 am ad1c9bdddf
    https://brainmass.com/business/beta-and-required-return-of-a-project/capital-budgeting-and-financial-analysis-questions-410178

    Solution Preview

    Hi,

    ** Please see the attached file for the complete solution response **

    Answer:
    1. What are the three factors that influence the required rate of return by investors? What two components make up the required rate of return on common stock?

    The three factors that influence the required rate of return by investors are:
    (a) Required real rate of return (Risk free rate of return)
    (b) Inflation premium
    (c) Risk premium

    The two components that make up the required rate of return on common stock are required real rate of return and the risk premium.

    2. What is risk premium and what were the risk premium on stocks and the maturity premium on Treasury Bonds for the ten year period? How is this determined?

    Risk premium is the amount of return that an investor gets on taking the extra risk as ...

    Solution Summary

    This solution provides a detailed discussion of a series of questions regarding capital budgeting and financial analysis.

    $2.19

    ADVERTISEMENT