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sleet_krkn [62]
3 years ago
15

Select the correct definition of the term "comparative advantage." the ability to produce a good or service at a lower opportuni

ty cost than another the ability to produce a good or service at a higher opportunity cost than another a nation offering more favorable trade policy with its allies than with other countries the ability to produce less of a good or service than another over a specified time period the ability to produce more of a good or service than another over a specified time period
Business
1 answer:
lana66690 [7]3 years ago
7 0

Answer:

The correct answer is: the ability to produce a good or service at a lower opportunity cost than another.

Explanation:

Comparative advantage implies the ability to produce a good at lower opportunity cost. Opportunity cost is the cost of giving up the alternative.

A nation is considered to be enjoying a comparative advantage in the production of a good if it can produce the good at a relatively lower opportunity cost than other nations.

A nation is said to be specializing in the production of a commodity if it has a comparative advantage in production.

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Muriel buys a $2,000 savings bond with a 4% coupon and 20 years to maturity. How much interest will she earn over the life of th
irina1246 [14]
To solve: use the simple interest calculation.

interest earned over the life of the bond = (bond price)(coupon rate)(years)
= (2,000)(0.04)(20)
= $1,600

So after 20 years on a 4% coupon bond starting at $2,000 Muriel will earn $1,600 in interest. 
3 0
3 years ago
Esquire Comic Book Company had income before tax of $1,700,000 in 2016 before considering the following material items: 1. Esqui
mel-nik [20]

Answer:

Explanation:

Partial income statement

For the Year Ended December 31, 2016

Income from continuing operations $975,000

Discontinued operations gain (loss):  

Income from operations of discontinued component $220,000

Income tax expense ($88,000)

Income on discontinued operations $132,000

Net income $1,107,000

Income from operations of discontinued component (including loss on disposal of $420,000) = $220,000

Income from continuing operations:

Income before considering additional items $1,700,000

Decrease in income due to restructuring costs ($75,000)

Before-tax income from continuing operations $1,625,000

Income tax expense (40%) ($650,000)

Income from continuing operations $975,000

5 0
3 years ago
EvenFlo Pipes forecasts a small increase in sales next year. To achieve this growth in sales, however, the firm must purchase an
TEA [102]

Answer: a. The firm must purchase lumpy assets to achieve the increase in sales.

Explanation:

EvenFlo Pipes needs to sell more pipes in order to see an increase in sales. Assuming they are the producers, they will need to produce more pipes than they have been doing and this will need them to increase their production capacity.

To do so they would have to invest in fixed assets as these are what produce pipes. This is why the firm will have to purchase lumpy assets that will help them produce and sell more pipes.

3 0
3 years ago
Each of the following factors affects the weighted average cost of capital (WACC) equation. Which of the following factors are o
Volgvan

Answer: The correct answers are "The general level of stock prices" and "The effect of the tax rate on the cost of debt in the weighted average cost of capital equation".

Explanation: The general level of stock prices and the effect of the tax rate on the cost of debt in the weighted average cost of capital equation are outside from firm's control because although companies have knowledge of the market, the general level of stock prices is not controlled by them, but by the market. And the effect of the tax rate is not controlled by companies because the tax rate is set by the state.

7 0
3 years ago
Assume that your firm consists of Division 1 (40 percent of the firm) and Division 2 (60 percent of the firm). The capital struc
tresset_1 [31]

Answer:

Division 1's WACC - Division 2's WACC = 11.752% - 14.6656% = - 1.9136% or Division 1 has the lower cost of capital of 1.9136% in absolute term comparing to Division 2.

Explanation:

Before starting, we need to convert unlevered beta into levered beta:

Levered beta of Division 1: 1.2 x ( 1 + (1-40%) x 0.25) = 1.38

Leverage beta of Division 2: 1.46 x ( 1+ (1-40%) x 0.25) = 1.679

Then, we start step by step as below:

First, using the CAPM model: Cost of equity = risk-free rate of return +  beta *(Market Rate of Return – Risk-free Rate of Return) , we find the cost of equity for Division 1 and Division 2.

  - Division 1's cost of Equity = 4% + 1.38 x( 12% -4%) = 15.04%

  - Division 2's cost of equity = 4% + 1.46 x (12% - 4%) = 17.432%

Second, determine the post-tax cost of debt applied for both Division: 6% x (1-tax rate) = 6% x (1 -40%) = 3.60%

Third, calculate the WACC for each Division:

  - Division 1's WACC = % of debt in capital structure x cost of debt + % of equity in capital structure x cost of equity = 20% x 3.6% + 80% x 15.04% = 11.752%;

  - Division 2's WACC = % of debt in capital structure x cost of debt + % of equity in capital structure x cost of equity = 20% x 3.6% + 80% x 17.432% = 14.6656%;

Finally, compare the WACC between the two Division:

Division 1's WACC - Division 2's WACC = 11.752% - 14.6656% = - 1.9136% or Division 1 has the lower cost of capital of 1.9136% in absolute term comparing to Division 2.

6 0
3 years ago
Read 2 more answers
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