The first statement is false.
A firm earning a zero profit is an action called predatory pricing, which there
can be a temporary loss because of a super low price and when a new firm enters
the market the new firm won’t be able to compete with a very low price forcing
the new firm out of the market. This action can be a barrier of entry making the
market less contestable. A firm in a contestable market should operate at
efficient level of production and earn a minimal profit close to equilibrium.
<span>It
is true that a contestable market model has important policy implications for
example to increase competition policy maker can decrease regulation so that
new firm can easily enter the market. Policy makers can also force firms to
allow other firms to use their networks encouraging new firms to enter the
market and lessening the monopoly power of restricting supplies. Policy makers
can also set up its own new firm and distribute its resources to small new
firms to increase competition.</span>
The impact on operating income for eliminating this business segment would be:
$54,900 decrease $135,100 decrease $52,900 decrease $190,000.
Answer:
Paul = $616.44
Amy = $1883.56
Explanation:
Given
Full Amount = $2,500
There are 90 days between January 1, 2018 and April.
Calculating the amount generated by Paul;
Paul = $2,500 * 90/365
Paul = $616.4383561643835
Paul = $616.44 ---- Approximated
There are (365-90)days left after April 2, 2018 till December 31, 2018
Calculating Amount Generated by Amy
Amy = $2,500 * (365-90)/365
Amy = $2,500 * 275/365
Amy = $1883.561643835616
Amy = $1883.56 --- Approximated
That is the total allowable deduction for Paul and Amy
Answer:
WACC= 9.8%
Explanation:
<em>The weighted Average cost of Capital is the average cost of capital for the different sources of long-term capital available to a firm weighted according to the proportion each source of finance bears to the total capital in the pool. </em>
After-tax cost of debt = (1- tax rate) × before tax cost of debt
= (1-0.3)× 8% = 5.6%
Total Equity = 20,000× 2= 40,000.
Bank loan = 20,000
Total value fund = 40,000 + 20,000 = 60,000
WACC= 5.5%× (2/6) + 12%× (4/6) = 9.8%
WACC= 9.8%
Answer:
FV= $273381.67
Explanation:
Giving the following information we need to find the value of the investment in present day
I=1000
i=0.05
n=115
The general formula to calculate the value of an investment for cases like this is:
FV= I*[(1+i)^n]
FV= 1000*(1,05^115)= $273381.67
