Answer:
9.90%
Explanation:
Debt-equity=debt/equity=0.40( debt=0.40 while equity is 1 since 0.40/1=0.40)
weight of debt=0.40/(0.40+1)=28.57%
weight of equity=1/(0.40+1)=71.43%
cost of equity=11.80%
cost of debt=6.50%
tax rate=21%
WACC=(weight of equity*cost of equity)+(weight of debt*cost of debt)*(1-tax rate)
WACC=(71.43%
*11.80%)+(28.57%*6.50%)*(1-21%)
WACC=9.90%
Answer: income effect of a price change.
Explanation: The income effect is known as the effect on real income when price changes, it can however be positive or negative. The income effect expresses the impact of increased purchasing power on consumption.
In this scenario, spending $10 for lunch, and you would like to purchase two cheeseburgers. When you get to the restaurant, you find out the price for cheeseburger has increased from $5 to $6, so you decide to purchase just one cheeseburger, this scenario best illustrates the income effect of a price change.
Answer:
NPV = -$78,318
Explanation:
cash flow 0 = -$310,000 - $190,000 = -$500,000
cash flow 1 = $125,000
cash flow 2 = $125,000
cash flow 3 = $125,000 - $58,000 = $67,000
cash flow 4 = $125,000 + $83,000 + $190,000 = $398,000
NPV = -$500,000 + $125,000/1.2 + $125,000/1.2² + $67,000/1.2³ + $398,000/1.2⁴ = -$78,318
Answer:
See below.
Explanation:
Since the expenses are related to the formation of the business, we first capitalize these expenses and record them in our balance sheet as,
Debit Intangible Assets (Formation) by $48,500
Credit Cash/Bank by $48,500
This records an asset for the year of operation.
We amortize or depreciate these type of capitalized costs over a defined period of time. Assuming that we write off the entire cost by the end of first year we will record amortization as,
Debit Amortization expense/Income statement by $48,500
Credit Intangible Assets (Formation) by $48,500
Hope that helps.