Answer:
The After Tax Cost of Debt = 0.072 or 7.2%
Explanation:
The question is to determine the After Tax Cost of Debt for Rolling Stone.
This is carried out as follows
Step 1: When we decide to calculate the Yield to Maturity, it should be noted that Market Value = Par Value
Therefore,
Coupon Rate which is the same as the Yield to Maturity (YTM) = 12%
Step 2: Based on this derivative, therefore,
After Tax Cost of Debt = Yield TO Maturity Rate (1-Marginal Tax Rate)
= 12% (1-40%)
= 0.12 (1-0.4)
The After Tax Cost of Debt = 0.072 or 7.2%
If all firms only earn a normal profit in the long run, firms will develop new products or lower-cost production methods because they can innovate and possibly earn an economic profit in the short run.
Explanation:
Competition involves constant efforts by companies and executives to do more than the loss (normal gains) of new goods or by improving ways to manufacture current products at lower prices. Therefore, if businesses can invent, they will achieve short-term economic advantage.
Economic benefit encourages entry, economic losses lead to exit and firms in a highly profitable market earn little economic income in a long-term equilibrium. In an industry where inflation does not change the costs of materials (a market with a constant cost), the long-term supply curve is a horizontal line.
slope of this demand curve for pizza = <u>-1/40</u>
<h3>
Briefly explained</h3>
Slope = changes in y/ changes in x
The shop sells 200 more pizzas if the price drops by $5 ($10 to $5). (100 to 300 pizzas) A good's quantity is always on the x-axis and its price is always on the y-axis. According to our justification, the cost is REDUCED by $5 (a reduction of -$5) and the quantity of pizzas sold rises by 200. The slope is therefore <u>-5/200 or -1/40.</u>
<h3>
What is demand curve?</h3>
The demand curve is a graphical depiction of the connection between the cost of a commodity or service and the quantity required over a specific time period.
The price will often be shown on the left vertical axis in a representation, and the amount needed will typically be shown on the horizontal axis.
Learn more about demand curve
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Answer:
285,000 units
Explanation:
The computation of the cash break-even point of sales units is shown below:
Cash break-even point = (Fixed cost - depreciation) ÷ (contribution margin per unit)
where,
Fixed cost = $7,600,000
Depreciation = $7,600,000 × 0.25% = $1,900,000
And, the contribution margin per unit is $20
So, the cash break-even point of sales units is
= ($7,600,000 - $1,900,000) ÷ ($20)
= 285,000 units
Answer:
The cost of equity using the DCF method: 4.39%.
The cost of equity using the SML method: 15.01%.
Explanation:
a. The cost of equity using the DCF method:
We have: Current stock price = Next year dividend payment / ( Cost of equity - Growth rate) <=> Cost of equity = Next year dividend payment/Current stock price + Growth rate = 0.3 x 1.04/80 + 4% = 4.39%.
b. The cost of equity using the SML method:
Cost of equity = Risk free rate + beta x ( Market return - risk free rate); in which Risk free rate is rate on T-bill.
=> Cost of equity = 6.3% + 1.3 x ( 13% -6.3%) = 15.01%.
