No. Because if it does, our country will lose alot of money plus what if there are alot of goods.
Answer:
Using the current capital structure
Ke = Rf + β(Risk premium)
Ke = 5 + 1.60(6)
Ke = 5 + 9.60
Ke = 14.60
Weighted cost of equity
= 14.60(20/100)
= 2.92%
Using the new debt-equity ratio
Ke = 5 + 1.60(6)
Ke = 5 + 9.6
Ke = 14.60%
Weighted cost of equity
Ke = 14.60(60/100)
Ke = 8.76%
Difference in cost of equity
= 2.92% - 8.76%
= -5.8%
Explanation:
There is need to calculate the cost of equity based on capital asset pricing model where Rf represents risk-free rate, Rp denotes risk-premium and β refers to beta. Then, we will calculate the weighted cost of equity by multiplying cost of equity by the proportion of equity in the capital structure. We will also calculate the new weighted cost of equity by multiplying the cost of equity the new proportion of equity in the capital structure. Finally, we will deduct the new weighted cost of equity from the old weighted cost of equity.
Answer:
12.28%
Explanation:
In this question, we use the Rate formula which is shown in the spreadsheet.
The NPER represents the time period.
Given that,
Present value = $1,407
Future value or Face value = $1,000
PMT = $1,000 × 20% = $200
NPER = 9 years
The formula is shown below:
= Rate(NPER;PMT;-PV;FV;type)
The present value come in negative
So, after solving this, the answer would be 12.28%
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