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Alfred Wegener was the scientist who proposed the Continental Drift Theory in the early twentieth century. Simply put, his hypothesis proposed that the continents had once been joined, and over time had drifted apart. I hope my answer has come to your help. God bless and have a nice day ahead!
Answer:
Answer of each requirement is given seperatly below.
a What is the value of Siebel using the DCF method?
Value under DCF = CF * (1+growth rate)/ (WAAC" -Growth rate)
Putting values (assuming after tax earning is all in cash)
Value of SI = 25 (1+6%)/ 20%-6% = 189 million dollars
"WAAC calculation
Here WAAC is equal to cost of equity (ke) as company is debt free.
so
Ke = risk free rate + beta (risk premium)
= 5 + 2.5 (6) = 20%
b What is the value using the comparable recent transactions method?
Based on recent tansaction the value of siebel incorporated will be calculated as shown below
Value of SI = Profit afte * 10 = 25 * 10 = 250 million dollars
Publicly-traded Rand Technology, a direct competitor of Siebel's sale is taken as bench mark.
c What would be the value of the firm if we combine the results of both methods?
By combining value of both value technique we get 189 + 250 = 439 million dollars.
Answer and Explanation:
As per the data given in the question,
The central bank have various tools to apply expansionary policy and these tools are :
- Reserve ratio.
- Discount rate.
- Open market operations.
The open market operations include the buying and selling of government owned securities by central bank to impact the monetary base in the economy. In case of any recession, the central bank should purchase government securities to enhance the money supply. Because whenever they do any kind of open market purchase there would definitely be increase in money in the economy. That's why increment in money supply decrease the interest rate in economy.
Nominal interest rate is the cost of borrowing so if there is decrement in interest rate, there would be consumption and investment activities. these both are the component of aggregate demand so the aggregate demand will increase, and this increment in aggregate demand helps the economy to recover in the situation of recession.
