If a company's stock is perceived to be more risky than average, what will happen to their equity cost of capital? Explain using the capital asset pricing model
What will be an ideal response?
A stock that is more volatile (riskier) than the market average will have a beta of greater than 1. This means that the return that stockholders will require will be greater than average [kj = Rf +?(km - Rf)]. In other words, the company will have to pay stockholders more since they must take a greater risk, and the equity cost of capital will rise.
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Which of the following is an example of signaling?
a. Pat is considering the purchase of a used car. Before making the purchase he has the car checked by an auto mechanic. b. Zach is applying for a new life insurance policy. Before writing the policy, the insurance company requires Zach to be examined by a doctor. c. Denise is applying for a new job. Before hiring her, the firm requires Denise to take a drug test. d. Marcus is planning to ask for Chaquila's hand in marriage. Before asking her, he buys her a box of her favorite chocolates and takes her to dinner at her favorite restaurant.
At an output of zero, ________ is zero.
A. total cost B. total variable cost C. total fixed cost D. All of the above are correct.