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kotegsom [21]
3 years ago
12

Harry Trading Company must choose its optimal capital structure. Currently, the firm has a 20 percent debt ratio and the firm ex

pects to generate a dividend next year of $5.64 per share. Dividends are expected to remain at this level indefinitely. Stockholders currently require a 12.3 percent return on their investment. Harry is considering changing its capital structure if it would benefit shareholders. The firm estimates that if it increases the debt ratio to 30 percent, it will increase its expected dividend to $5.92 per share. Again, dividends are expected to remain at this new level indefinitely. However, because of the added risk, the required return demanded by stockholders will increase to 13.6 percent. Based on this information, should Harry make the change?
Business
1 answer:
AnnyKZ [126]3 years ago
4 0

Answer:

They should not make the change because the price of the stocks will decrease.

Explanation:

the current price of the stocks using the perpetuity formula = dividend / required rate of return

current price with current capital structure = $5.64 / 0.123 = $45.85

if the company changes its capital structure by increasing debt, the price of the stocks will be

$5.92 / 0.136 = $43.53

since the price of the stocks would actually decrease if the capital structure changes, the change should not be made. The stockholders' wealth is measured by the price of the stocks, and if the price of the stocks decreases, then the stockholders' wealth also decreases.

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1.Explain one advantage and disadvantage of internal recruitment.
babymother [125]

Answer:

1.Reduce time to hire.

2.These disadvantages of external recruitment make a clear distinction between its limitations and it will also provide beneficial knowledge about the techniques of an external recruitment process.

a formal account of an employee's responsibilities.3.

Explanation:

4 0
3 years ago
If Keynes’ law applies during economic contractions and Say’s law applies during economic expansion, how will the three goals of
Lelu [443]

Answer:

Answer is option a, i.e. trade-offs and connections may differ in short run and the long run.

Explanation:

Keynes' law in economics and Say's law in economics are contradictory in their perspective. Where Keynes' law says that it is the demand that creates the supply, on the other hand, Say's law states that its the supply that tends to create the demand. But, we cannot neglect any of the above facts as demand and supply cant operate independently. So, on combining the two laws, we happen to take both the given laws into account. Also, it is found that Keynes' law is more appropriate and accurate for the short-run whereas, Say's law is for the long run. This thus creates trade-offs and connections that differ in the short-run and long-run by affecting the three important goals of macroeconomics, i.e. higher standard of living, low inflation, and low unemployment.

8 0
3 years ago
An economy increases the amount of physical capital per worker. At the same time, human capital per worker, the number of worker
snow_tiger [21]

Answer:

increase since his/her productivity will increase

Explanation:

An increase in physical capital generally increases worker productivity even if all the other factors of production remain the same. Physical capital includes machinery, buildings, computers, tools, etc., which make it easier for the workers to perform their tasks, therefore it increases their productivity.

E.g. a worker needs to deliver goods, and if he uses a delivery truck instead of a bicycle, he/she will be able to do it faster. That will allow the worker to make more deliveries per day ⇒ increase in the worker's productivity. The delivery truck represents the increase in physical capital.

5 0
3 years ago
Coca-Cola produces and distributes products under the brand names Coke, Minute Made, Dasani, and many others. This collection of
kolbaska11 [484]
Answer is conglomerate
7 0
3 years ago
On December 1, Miser Corporation exchanged 6,000 shares of its $25 par value common stock held in treasury for a parcel of land
Bond [772]

Answer:

Capitalized value $582.000.

Explanation:

Step 1. Given information.

  • The common share of Miser had a fair value of $50 per share.

Step 2. Formulas needed to solve the exercise.

  • Fair value of shares = Price per share * (Amount by selling scrap -        exchanged shares)
  • Capitalized value = fair value of shares - value of scrap.

Step 3. Calculation.

Fair value of shares = $50 * (18.000 - 6.000) = $600.000

<em />

<em>Land should be capitalized by fair market value of share exchanged less any recovery of scrap as land will be developed for future plant.  </em>

Step 4. Solution.

<em />

Fair value of shares = $50*12.000 = $600.000  

Less: value of scrap = $18.000  .

Capitalized value = $600.000   - $18.000 = $582.000.

4 0
3 years ago
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