Kaleb Konstruction, Inc., has the following mutually exclusive projects available. The company has historically used a three-yea
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Answer:
Suppose a senator considers introducing a bill to legislate a minimum hourly wage of $12.50.
Wage Labor Demanded Labor Supplied
$12.50 375,000 625,000
This will result in a surplus of labor (625,000 higher than 375,000)
Which of the following statements are true?
- Binding minimum wages cause structural unemployment. As with all price floors, a deadweight loss results, because the quantity supplied is much greater than the quantity demanded. In this case, the price of labor is the wage, and the deadweight loss = structural unemployment
- In the absence of price controls, a surplus puts downward pressure on wages until they fall to the equilibrium. Since a labor surplus exists, the price of labor should start to decrease in order to match the equilibrium price.
- If the minimum wage is set at $12.50, the market will not reach equilibrium. The quantity supplied of labor is much greater than the quantity demanded for labor resulting in a surplus.
Answer:
There's an error in the numbers for this question; I found the correct one and pasted it below;
"Great Lakes Steel Supply is losing significant market share and thus its managers have decided to decrease the firm's annual dividend. The last annual dividend was $1.30 per share but all future dividends will be decreased by 2.75 percent annually. What is a share of this stock worth today at a required return of 15.5 percent? "
Explanation:
Use dividend discount model (DDM) to calculate the stock price
whereby,
P0 = Current price
D0 = Last dividend paid = 130
g = growth rate = -275% or -2.75 as a decimal
r = required return = 155% or 1.55 as a decimal
Next, plug in the numbers to the DDM formula above;
Therefore this stock is worth $6.93