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kkurt [141]
3 years ago
7

Suppose your company needs $16 million to build a new assembly line. Your target debt−equity ratio is .7. The flotation cost for

new equity is 9 percent, but the flotation cost for debt is only 6 percent. Your boss has decided to fund the project by borrowing money because the flotation costs are lower and the needed funds are relatively small. a. What is your company’s weighted average flotation cost, assuming all equity is raised externally?
Business
1 answer:
kumpel [21]3 years ago
4 0

Answer:

7.76%

Explanation:

The computation of the weighted average flotation cost is shown below:

= Weightage of equity × flotation cost for new equity +  Weightage of debt × flotation cost for debt

Since the debt-equity ratio is 0.7 which means the debt value is 7 and the equity value is 10 so the total firm would be 1.70

So, Weighted of debt = (0.7 ÷ 1.70) =0.411

And, the weighted of common stock = (Common stock ÷ total firm)

                                                              = (1) ÷ (1.70)

                                                              = 0.588    

Now put these values to the above formula  

So, the value would equal to

= (0.588 × 9%) + (0.411 × 6%)

= 0.05292% + 0.02466%

= 7.76%

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The correct statement is: "The fixed cost per unit will decrease when volume increases."

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Should imports to the United States be curtailed by, say 20 percent to eliminate our trade deficit? What might happen if this we
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In a world that is synchronized on a global scale, trade between nations is constant. Imports cannot be reduced by 20% in order to close the trade deficit.

<h3>Why it is not possible to reduce imports?</h3>

There are certain nations that will be impacted if the United States decides to cut imports by 20%.

As a result, imports from the United States will likewise be restricted in other nations.

In other words, the United States may experience a fall in exports while attempting to reduce imports. The overall impact on trade imbalances could be minimal.

The trade conflict between the United States and China is a good illustration. China responded to the United States taxes on its imports by imposing its own levies. As a result, both countries suffered.

As a result, there is no quick fix for decreasing trade deficits. A more delicate balance between consumption and production must be achieved over time.

The manufacturing industries must have favorable policies and incentives to encourage consumer demand for locally made items.

Check out the link below to learn more about trade deficit;

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4 0
1 year ago
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3 years ago
Which of the following activities are typically included in a project kick-off meeting? ​
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  • Beginning the project client relationship on a good note and gaining client's support.
  • Putting one's best efforts with a systematic planned approach for the project kick off client meeting.

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