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forsale [732]
2 years ago
9

Consider a hypothetical economy where there are no taxes and no international trade. households spend $0.80 of each additional d

ollar they earn and save the remaining $0.20. if there are no taxes and no international trade, the oversimplified multiplier for this economy is .
Business
1 answer:
KengaRu [80]2 years ago
7 0
The formula for the multiplier is 1 / (1 - MPC), whereby MPC represents the marginal propensity to consume. Applying the formula to our case, we get: M (multiplier) = 1/(1-0.8) = 1/0.2 = 5. The multiplier in this economy is therefore 5.
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...when that project will have the same level of risk as the firm's current operations

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Weighted average cost of capital (WACC) is the company's cost of capital based on its proportion of equity and debt used in its capital structure. It can be used as the discount rate for calculating the present value of future expected cashflows of a project if the project is determined to be of similar risk to the company's operations; meaning that the estimated beta of the project is the same as the beta of the firm.

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3 years ago
Rob Lowe would like to invest $100,000 in Franklin Inc., which is offering common stock, preferred stock, and bonds on the open
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Answer:

1. Franklin Inc. is not under any legal obligation to pay divided to common stock holders. A company can only pay dividend when it makes profit. A company may not pay dividend even when it makes profit because payment of dividend at the discretion of board of directors. Dividends on common stocks are not fixed.

Payment of dividend to preferred stock holders is fixed because preferred stocks are fixed income securities. Dividend in this case does not depend on the financial fortune of a company. In case of cummulative preferred stocks, arrears of dividend in a given year can be carried forward to another year.

Franklin Inc is under a legal obligation to pay interest to debenture holders because the company is under bond to pay principal and interest as and when due. Bonds are also fixed income securities in which interest is fixed regardless of whether the company makes profit or not.

2. Rob Lowe is advised to invest in bonds because he is guaranteed of his principal and interest as and when due since the interest on bond and principal do not depend on the financial fortune of the company.

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In the first case, explanations were made on the obligation of the company to pay dividend or interest.

In the second case, explanations were provided on the appropriate investment to undertake.

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3 years ago
The following information has been provided for the City of Elizabeth for its fiscal year ended June 30. The information provide
Cerrena [4.2K]

Answer

The answer and procedures of the exercise are attached in a microsoft excel document.  

<em />

<em>You didn´t post the complete information of the exercise, I searched the exercise online and tried to ask the most useful question.</em>

Explanation  

Please consider the data provided by the exercise. If you have any question please write me back. All the exercises are solved in a single sheet with the formulas indications.  

Download xlsx
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