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2 years ago

Nate is a supply-side economist. as such, nate predicts that the deregulation of industries would result in __________

1 answer:

7 0

Nate is a supply-side economist. as such, nate predicts that the deregulation of industries would result in decreased work effort by high income workers. A macroeconomic theory called supply-side economics holds that reducing taxes, reducing regulations, and promoting free trade are the best ways to promote economic growth.

Increasing supplies of products and services at reduced prices will benefit customers, and employment will rise, according to supply-side economist. expanding the number of free trade agreements to support commercial endeavors. lowering tax rates on major industries and people with a net worth of at least $10,000,000 by 15%. giving private enterprises access to public land.

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Assume again that the cost of capital is 7 percent and the effective tax rate is 40 percent. How would the payback, internal rat

vfiekz [6]

Answer:

If the effective tax rate increases then the net savings coming from investments will get lowered as a result the investment will have higher payback period (The increase in effective tax rate would lower demand of the product which means there is decline in net saving arising from the sale of the product). Likewise this decrease in annual net savings will also decrease the internal rate of return which shows that their are increased chances of project rejections. The NPV method is based on cash flows and relevant costing just like IRR and payback method but the only difference is that it assumes that the cash earned would be reinvested at cost of capital. The NPV will also decrease due to increased effective tax rate.

4 0

3 years ago

You are given the following information for Watson Power Co. Assume the company’s tax rate is 23 percent. Debt: 8,000 5.7 percen

____ [38]

Answer:

the company's WACC is 10.04%

Explanation:

Weighted Average Cost of Capital (WACC) is the minimum return that a project must offer before it can be accepted. It shows the risk of the company.

Capital Source Market Value Weight Cost Total Weight

Debt $8,400,000 27.71% 4.389 % 1.22%

Common stock $24,190,000 71.17% 12.2% 8.68%

Preferred stock $1,400,000 4.12% 3.5% 0.14%

Total $ 33,990,000 100.00% 10.04%

Calculation of Market Value and Cost of Debt

Market Value = 8,000×($1,000×105%) = $8,400,000

Cost of Debt = interest × (1 - tax rate)

= 5.7% × ( 1-0.23)

= 4.389 %

Calculation of Market Value and Cost of Common stock

Market Value = 410,000× $59 = $24,190,000

Cost of Common stock = Risk free Rate + Beta × Market Premium

= 4.5% + 1.10× 7%

= 12.2%

Calculation of Market Value and Cost of Common stock

Market Value = 17,500× $80 = $1,400,000

Cost of Preferred stock = 3.5%

7 0

3 years ago

In 1916, the ford motor company sold 500,000 model t fords at a price of $440. henry ford believed that he could increase sal

quester [9]

For the answer to the question above,
we must use this formula,
(New - Old)/ (Ave. of New and Old)

In this case,
501k -500k/(500,500(which is the ave. of the two.
Then it would be 1k/500,500

Then the answer would be .0020
Then
-1.439.5/439.5 because this is the average of the two.
so the answer would be .0023

Then finally divide the rate on change of quantity by the rate of change in price which is
0.002/-0.0023

Then the answer would be -.87

So the elasticity on the demand of model T is .87 ( remove the negative because elasticity is always positive.)

6 0

3 years ago

true or false and then EXPLAIN why. Assume the economy produces five goods. If the prices of three of the goods increase, then t

Ipatiy [6.2K]

Answer:

The correct answer is False.

Explanation:

The prices of goods and services are fundamentally determined by their demand and supply. When they increase or decrease, it is because one of these two variables has led to a change. Specifically, an increase in prices occurs especially for three reasons.

Case 1: Supply is maintained and demand increases :

In this situation, companies continue to offer the same amount of a good or service, but we all buy more of them. This can happen for many reasons, among them, an increase in the population (there are more people and more traffic jams and more bikes are sold for circulation on the urban road), it becomes somewhat fashionable, our incomes increase, etc.

It can also happen that the price of a substitute rises (goods that give us exactly the same, such as orange soft drinks of one brand or another). If the price of brand X increases, the demand for brand Y will surely increase, since it will cover the same need at a lower price.

Case 2: Supply falls and demand remains :

A reduction in the supply of companies will make it more expensive. It can happen for a wide range of reasons: from the number of companies with these offers decreasing until the technology of some firms becomes outdated and only a few remain on the market. It may also happen that the price of inputs increases and that manufacturers cannot produce the same quantity as before due to this increase in price.

Case 3: Supply falls and demand increases :

In this case, a ‘mix’ of the phenomena that we have seen previously would take place. However, there are other more specific variables that cause prices to vary. For example, on occasion, governments artificially increase their monetary base. In other words, they use the strategy of manufacturing and issuing money, with more money in circulation than an economy really needs.

8 0

3 years ago

You are given the following long-run annual rates of return for alternative investment instruments: U.S. Government T-bills 3.10

Dvinal [7]

Answer:

The real rate of return is 0.10%

Explanation:

For computing the real rate of return, we need to apply the formula which is shown below:

( 1 + nominal rate) = ( 1 + real rate) × (1 + inflation rate)

So,

The real rate = {(1 + nominal rate) ÷ (1 + inflation rate)} - 1

= ((1 + 3.10%) ÷ (1 + 2%)} - 1

= (1.031 ÷ 1.02) - 1

= 1.0107 - 1

= 0.10

The Government T-bills is only the nominal rate so we considered this only

5 0

4 years ago