Answer:
Raising the Funds through Retained Earnings
WACC = Ke(E/V) + Kp(P/V) + Kd(D/v)(1-T)
WACC = 14.7(0.36) + 12.2(0.06) + 11.1(0.58)(1-0.40)
WACC = 5.292 + 0.732 + 3.8628
WACC = 9.89%
Raising New Equity
WACC = Ke(E/V) + Kp(P/V) + Kd(D/v)(1-T)
WACC = 16.8(0.36) + 12.2(0.06) + 11.1(0.58)(1-0.40)
WACC = 6.048 + 0.732 + 3.8628
WACC = 10.64%
Difference in WACC = 10.64% - 9.89%
= 0.75%
Explanation:
WACC equals cost of equity multiplied by proportion of equity in the capital structure plus cost of preferred stock multiplied by proportion of preferred stock in the capital structure plus after-tax cost of debt multiplied by proportion of debt in the capital structure.
In this case, there is need to calculate WACC if funds were raised through retained earnings and WACC if funds were raised through new common stock. Then, we will determine the difference in WACC.
Answer:
Explanation:
A. The effect of a permanent increase in government purchases is different from that of a temporary increase.
I case of a permanent increase, the income effect is more as compared to that of a temporary increase. This happens because in case of a permanent increase, the present value of taxes is high in order to pay for the added government purchases. Hence, labor supply increases more in case of permanent change.
B. When consumption falls by the equal amount of taxes, there will be no change in the desired national savings. As a result, there will be no shift in the savings curve. If investment is also not changed or affected, The IS curve would not shift.
C. When there is a permanent increase in government purchases and taxes, the supply of labor will increase, thus shifting the FE curve to the right. In order to restore equilibrium back in the economy, the price level must decline, shifting LM curve to the right. As a result, output increases and interest rate falls.
Answer:
$30,000
$20,000
$10,000
Explanation:
Reserves is the total amount of a bank's deposit that is not given out as loans
Reserves = Deposits - outstanding loans
$100,000 - $70,000 = $30,000
Required reserves is the percentage of deposits required of banks to keep as reserves by the central bank
Required reserves = reserve requirement x deposits
0.2 x $100,000 = $20,000
Excess reserves is the difference between reserves and required reserves
$30,000 - $20,000 = $10,000
Owner could sell a property he or she fixed up.
Residents pay rent to the owner.
Answer:
Wilbur cannot rescind the contract based on his unilateral mistake.
Explanation:
Lets suppose that I made an offer of $1000 which you accepted to buy my car on a phone call for $1000 and later in the same day a person offered me more money for the same car and I sold the car to him. You went to court and I said that I mistakenly made an offer of $1000 which means that every person who revoke the clauses will make lame excuses in the court. If this act is permitted then the law gives the people free hand whatever they desire to do with the contract. So for this reason this act was considered unethical and the court said that the mistakes that are unilateral are not be rescind.
