Answer:
Expected return on equity is 11.33%
Explanation:
Using Weighted Average Cost Capital without tax formula, overall rate of return is given by the formula:
WACC=(Ke*E/V)+(Kd*D/V)
Kd is the cost of debt at 6%
Ke is the cost of equity at 12%
D/E=1/2 which means debt is 1 and equity is 2
D/V=debt/debt+equity=1/1+2=1/3
E/V=equity/debt+equity=2/1+2=2/3
WACC=(12%*2/3)+(6%*1/3)
WACC=10%
If the firm reduces debt-equity ratio to 1/3,1 is for debt 3 is for equity
D/V=debt/debt+equity=1/1+3=1/4
E/V=equity/debt+equity=3/1+3=3/4
WACC=10%
10%=(Ke*3/4)+(6%*1/4)
10%=(Ke*3/4)+1.5%
10%-1.5%=Ke*3/4
8.5%=Ke*3/4
8.5%=3Ke/4
8.5%*4=3 Ke
34%=3 Ke
Ke=34%/3
Ke=11.33%
Answer:
Hedge fund are financial partnerships that use pooled funds and employ different strategies to earn active returns for thier investors.. Hedge fund include long-short equity, market neutral, volatility arbitrage and merger arbitrage. They are generally only accessible to accredited investors
Answer:
less than the government spending multiplier
Explanation:
Given :
Percentage spends by a households for the increase in the income = 75%
So the mpc = 0.75
Potential output = 600 billion arcs
The government multiplier is = 
= 4
The tax multiplier is = 
= 3
Thus we see that the tax multiplier is less than the government spending multiplier.
