Answer:
E. Suppose a firm's total assets turnover ratio falls from 10% to 9%, but at the same time its profit margin rises from 9% to 10% and its debt increases from 40% of total assets to 60%. Under these conditions, the ROE will increase.
Answer:
The correct answers are letters "A", "B", and "C": straight-line depreciation, manager's salary, store rent.
Explanation:
Fixed Costs are business expenses that do not change as the level of production goes up or down. They are one of two types of business expenses the other being variable cost. Variable costs do change as the volume of production changes. Examples of fixed costs are high-executive salaries, rent, depreciation, and insurance. Examples of variables costs are commissions, raw materials, and transportation fees.
Answer:
c. Alcohol consumption decreases, whereas the alcohol market price increases if the tax is placed on the sellers or decreases if the tax is placed on the buyers.
Explanation:
Elastic demand is the situation that when the price of a good goes up the quantity demanded reduces. Since alcohol demand and supply are both elastic, If commodity tax is imposed on sellers then they decrease the supply and increase the price of alcohol. The increased price of alcohol will make buyers buy less of alcohol thereby reducing the consumption of alcohol.
Answer:
A. 12.1%
B. 8.9%
Explanation:
a. Calculation for What is the company's new cost of equity
Using this formula
New cost of equity=Cost of capital+[(Cost of capital- Debt interest rate ) *(Debt-equity ratio)*(1)]
Let plug in the formula
New cost of equity=[0.089+[(0.089-0.057)*(1)*1]
New cost of equity=[0.089+0.032*(1)*1]
New cost of equity=[0.121*(1)*1]
New cost of equity=0.121*100
New cost of equity=12.1%
Therefore the company's new cost of equity will be 12.1%
b. Calculation for What is its new WACC
Particular Weight Cost Weighted cost
Equity 0.5000 *12.1% = 0.0605
Debt 0.5000 * 5.7% =0.0285
WACC =0.089*100
WACC =8.9%
(0.0605+0.0285)
Therefore the new WACC will be 8.9%
Answer:
The circular flow model shows the interaction between two groups of economic decision-makers―households and businesses―and two types of economic markets―the market for resources and the market for goods and services.
