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4 years ago

Society suffers a deadweight loss in a pure-monopoly market because

1 answer:

8 0

A pure-monoply means that a company does not have to compete with other producers within the market. Since they aren't competing with a good or service, they aren't competing with each others customers either. When a company does not have to compete on price/customers they may end up being greedy and have market failure.

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The preemptive right is important to shareholders because it a. protects bondholders, and thus enables the firm to issue debt wi

Rom4ik [11]

Answer:

b. protects the current shareholders against a dilution of their ownership interests.

Explanation:

Shares are ownership interests that are owned by business owners and measures the degree to which an individual has a stake in a company.

Preemtive right occurs when a shareholder has a right to purchase a particular portion of newly issued shares.

For example if an individual has 40,000 shares and additional 250,000 shares are issued, he can have the right to purchase an additional 30,000 of the new shares.

The preemtive right prevents dilution of ownership interests by ensuring old stockholders have a stake in newly issued shares.

7 0

3 years ago

a firm has a pure discount loan with face value of $75,000 that is due in six months. the assets of the firm are currently worth

ioda

As you owns stock in a firm that has a pure discount loan due in six months. The loan has a face value of $70,000. The assets of the firm are currently worth $96,000. The stockholders in this firm basically own a <u>call option</u> on the assets of the firm with a strike price of <u>$70,000</u>.

<h3>What Is a Call Option?</h3>

Basically, a call options refers to a financial contracts that give the option buyer the right, but not an obligation to buy a stock, bond, commodity or other asset or instrument at a specified price within a specific time period.

<h3>What is a Strike price?</h3>

On an options contract, a strike price refers to the the price at which the underlying security can be either bought or sold once exercised. It is also known as the exercise price and it is a key feature of an options contract.

In conclusion, as the firm has a pure discount loan with face value of $75,000 which is due in six months whereas its assets are worth $96,000, then, we will say the firm have a call option with a strike price of $96,000.

Read more about Call Option

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8 0

1 year ago

Sheridan Company borrowed $3200000 on a construction loan at 12% interest on January 2, 2020. This loan was outstanding during t

Lubov Fominskaja [6]

Answer:

$1,594,000

Explanation:

Calculation to determine what The interest capitalized for 2020 was

2020 interest capitalized= $3,200,000* 12%*11/12 + $13,800,000 * 9%

2020 interest capitalized=$352,000+$1,242,000

2020 interest capitalized=$1,594,000

Therefore The interest capitalized for 2020 was $1,594,000

6 0

3 years ago

Canyon Buff Corp. is considering the purchase of a new piece of equipment which would cost $11,000. This equipment will have a f

Furkat [3]

Answer:

Tax shield on depreciation = 600

Explanation:

given data

new piece of equipment = $11,000

salvage value = $1,000

marginal tax rate = 30%

average tax rate = 20%

time period = 5 year

to find out

net effect of annual depreciation on the free cash flow

solution

we know here cost of asset and Salvage value so we get depreciation cost

depreciation cost is = 11000 - 1000 = 10000

and

annual depreciation = 2000

so that Tax shield on depreciation will be

Tax shield on depreciation = 2000 × 30%

Tax shield on depreciation = 600

5 0

4 years ago

The consumer price index (CPI) can be used to measure inflation. There are potential problems with this process though that can

DIA [1.3K]

Answer:

a. Overstates Inflation.

In the case of Mary and Bob, the CPI would have already increased but in this case the price of the minivan increased as well. This will overstate inflation because it will not measure the general rise in price alone (inflation), it will also measure the rise in price as a result of the new minivan having better features.

b. Understated Inflation

Donna's case represents an understated inflation because the quantity shrank yet the price stayed the same. This means that the price is now buying less quantity than it used to which is inflation because more dollars are now required to buy the previous amount. This was not however recorded as there was no change in price.

c. Overstates Inflation

In the case of Zach, the inflation will be overstated because Zach is no longer buying bagels and is now buying muffins so continuing to use bagels as a representative good in the basket of goods used to calculate CPI would be overstating it.

d. Accurate representation of Inflation

In Chris's case, the increase in the price of the same shoe over the years has been because of a general rise in prices and not because it is a different model. It is the same shoe and its price is rising generally so this is an accurate depiction of inflation.

6 0

3 years ago