Complete Question:
Akram owns a small farm.He employs 80 workers in the field and has recently hired a manager to help him manage the farm. The income of the business varies greatly during the year. The farm makes a small profit but Akram is ambitious. He wants to take over a neighbors farm and increase the range of crops he sells. He thinks that he needs long-term finance and plans to take out bank loan to pay for the takeover. He has already borrowed money to buy a new tractor. A friend has advised him to form a company and sell shares.
Requirement. Identity two types of short-term finance Akram could use when the farm income is low
Answer with its Explanation:
The two types of short term finances are as under:
- Merchant Cash Advance: It is also known as supplier payables but in fact it is actually an cash advance by supplier to promote its sales by allowing credit for a short term. It doesn't what level of profits the company is earning, the supplier always allow small period for payment of its goods.
- Invoice Financing: It helps the company borrow money from money lenders (mostly banks) against the debtors accounts. This is usually a short term loan with option to expand both time and money if the company has proven to growth and better credit control. The invoice finacing doesn't effect the borrowings in short term if the business profits are low because for qualifying for such loan the company must have better cash postion. Though higher profits might help in securing the short term loan by using invoice financing but cash generation is the key requirement here.
Banks make a profit by c. charging interest
Answer:
Cost of capital = 12.40%
Explanation:
given data
cost of equity = 15.4 percent
pretax cost of debt = 8.9 percent
debt-equity ratio = 0.46
tax rate = 34 percent
to find out
What is the cost of capital for this project
solution
first we get Equity multiplier that is express as
Equity multiplier = 1 + debt-equity ratio ..................1
put here value
Equity multiplier = 1 + 0.46
Equity multiplier = 1.46
and
Weight of equity will be
Weight of equity = 
....................2
put here value
Weight of equity = 
Weight of equity = 0.6849
and
Weight of Debt will be here
Weight of Debt = 1 - weight of equity ...........................3
put here value
Weight of Debt = 1 - 0.6849
Weight of Debt = 0.3151
so
Cost of capital will be here as
Cost of capital = Weight of Debt × pretax cost of debt × (1- tax rate ) + cost of equity × Weight of equity .....................4
put here value we get
Cost of capital = 0.3151 × 8.9% × (1 - 0.34) + 15.4% × 0.6849
Cost of capital = 12.40%
Answer:
$35,010,000
Explanation:
Calculation for the proper cash flow amount to use as the initial investment in fixed assets when evaluating this project
Cash flow = $11.4 million + $22.6 million + $1,010,000
Cash flow = $35,010,000
Therefore the proper cash flow amount to use as the initial investment in fixed assets when evaluating this project is $35,010,000
Increased use of current inputs in the production process is the short-term response of aggregate supply to rising demand (and prices).
A company can't, for the short term, build a new factory or introduce new technology to boost production efficiency because the level of capital is fixed.
What is short run and long run aggregate supply?
The intersection of the economy's aggregate demand and long-run aggregate supply curves determines its equilibrium real GDP and price level in the long run. The short-run aggregate supply curve is an upward-sloping curve that shows the quantity of total output that will be produced at each price level in the short run.
To learn more about aggregate supply here
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