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liberstina [14]
1 year ago
7

using the scenarios in case exhibit 9, what role does leverage play in affecting the return on equity (roe) for cpk? what about

the cost of capital?
Business
1 answer:
motikmotik1 year ago
6 0

Using the scenarios in case exhibit 9, Leverage will always lead to an increase in the total rate of return in the equity because leverage will be increasing the interest tax Shield due to which it can be seen that the total market value of the company has increased with a higher amount of debt capital.

The cost of capital is generally decreasing with a higher amount of leverage as there will be benefits associated with interest tax shield.

It can be noticed that when a high amount of leverage is used by the company, it is eventually leading to a higher amount of market value for the company as well so higher leverage is leading to a higher amount of market value for the company so leverage is directly related to increases in the market value as high amount of leverage will be increasing the total market value.

Leverage is an investment strategy that uses borrowed money (specifically, the use of various financial instruments or borrowed capital) to increase the potential return on investment. Leverage can also refer to the amount of debt a company uses to fund its assets.

Leverage is the amount of debt a company has in its debt-equity combination (capital structure). A company with more debt than the industry average is considered highly leveraged. The definition of leverage is the act of leverage or force to influence a person, event, or thing. An example of a lever is the action of a seesaw. An example of leverage is being the only person running for class president. noun.

Learn more about  Leverage here

brainly.com/question/3966216

#SPJ4

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Which of the following best describes the difference between a convertible bond and a warrant? Convertible bonds give the invest
levacccp [35]

Answer: Statement A

Explanation: Convertible bonds is a type of bond security which gives its holder the right to convert each bond to a specified number of shares. These are hybrid securities having features of both equity and debt.

.

Warrants are securities that give their holder the right to purchase the common shares of the company at a specified price and before a certain time period.

.

Thus, from the above explanation we can conclude that statement A is correct.

4 0
3 years ago
In a perfectly competitive market, the long-run market supply curve tends to be horizontal or nearly so. What is another way to
Degger [83]

Answer: There has been a drop in demand.

Explanation:

The strength and sustainability of a business is the demand in the market, it would be painful and a loss making so many productions and there is little or nothing for demand at the moment. So the target is way to make sure there is a demand on the long run which will match up the production.

3 0
3 years ago
U.S. GDPa. includes production of foreigners working in the U.S. but excludes production by U.S. residents working in foreign co
LuckyWell [14K]

Answer:

The correct answer is letter "A": includes production of foreigners working in the U.S. but excludes production by U.S. residents working in foreign countries.

Explanation:

The Gross Domestic Product or GDP represents the overall market value of all the goods and services a country produces. The GDP measures the size of the economy and it is determined by the following formula:  

GDP = C+ G + I + NX

Where:

C = Private consumption

G = Government spending

I  = Businesses' capital spending

NX = Net exports (exports-imports)

Labor is part of the GDP as well. It could be included in government spending or capital spending. <em>A nation's labor productivity is the sum of all the labor force production within the country regardless of the nationality of the workers</em>. <em>Citizen's productivity working abroad will be included in the GDP of the country where they work</em>.

3 0
3 years ago
Suppose there are only two firms that sell smartphones: Flashfone and Pictech. The payoff matrix that follows shows the profit (
Vladimir [108]

Answer:

Flashfone and Pictech

The Nash equilibrium is achieved when Pictech and Flashfone price their smartphones high without the other party changing their strategy.  

Explanation:

a) Data and Calculations:

                                Pictech  

                          High         Low

             High     8   8        3  10

Flashfone

             Low    10   3        5   5

b) By acting at the Nash equilibrium and pricing their smartphones high, Pictech and Flashfone achieve a payoff of $8 million respectively.  This payoff level does not put any of the two firms at a disadvantage.

7 0
2 years ago
Explain five (5) contributions of the manufacturing industry to industrialization​
Drupady [299]

Answer:

Line production system

Scale of production

Development of Factories

Development of Capital Machinery

Development of Capital Goods Industry.

Explanation:

Line production system: This system was adopted in manufacturing companies to divide the tasks between the workers so a product can be manufactured in the fastest way possible

Scale of production: The manufacturing industry develop high levels of production that allow surpluses of production of goods in the economy.

Development of Factories: The manufacturing industry was the first in organize the Plant for production purposes. Therefore, the creation of what is nowadays known as factories was a consequence of this organization.

Development of Capital Machinery: Manufacturers Researched and developed new machines to improve the times of production. With time this technology was used for more industries to achieve fast performances.

Development of Capital Goods Industry: As machines were developed the industry of Capital goods arose and became an important source of technology for companies.

3 0
3 years ago
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