Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Budget Shoes has three operating divisions, Children, Sport, and Everyday Adult. The following table outlines the quarterly earnings for the Sports Division: Quarter Revenue ($'000)

image text in transcribedimage text in transcribedimage text in transcribedimage text in transcribed

image text in transcribedimage text in transcribedimage text in transcribedimage text in transcribed
Budget Shoes has three operating divisions, Children, Sport, and Everyday Adult. The following table outlines the quarterly earnings for the Sports Division: Quarter Revenue ($'000) Costs ($'000) Net Profit ($'000) July - September 500 525 (25) October - December 1,250 800 450 January - March 750 800 (50) April - June 1,350 1000 350 Mean 962.5 781.25 181.25 Standard Deviation 701.34 337.96 377.28 (Annual) Note: Budget Shoes cost of capital is 6% and the 10-year government bond rate is 3%.Calculate the amount of Economic Capital for net profit based on a 99% confidence level, rounded to the nearest ($'000). Select one: O a. 29,300 O b. 14,650 O c. 50,933 O d. 29,633 O e. 101,533Assuming a normal distribution, what is the Earnings at Risk calculation for Revenue and Net Profit using a 99% confidence level, rounded to the nearest ($'000)? Select one: O a. 5,661 and 3,046 O b. 1,630 and 879 O c. 5,661 and 3,056 O d. 1,634 and 879 O e. 1,634 and 889What is RORAC based on the amount of Economic Capital calculated in 2, rounded to one decimal place? Select one: a. 7.6% O b. 2.5% O c. 13.1% O d. 7.1% O e. 4.9%

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Personal Finance Building Your Future

Authors: Robert B. Walker, Kristy P. Walker

1st edition

9780077861728, 978-0073530659

More Books

Students also viewed these Finance questions