Answer:
The correct answer is the option D: A negative real shock
Explanation:
To begin with, in the case presented where the economy has suffered from high inflation and unemployment rates then the most likely situation that could have happened before to explain this outcome is that the country and its economy were harmed badly by a negative real shock. This tend to happen when the aggregate supply is low and this one tends to decline rapidly affecting the economy in its whole due to the fact that the sellers are now producing less of the products and services and therefore the consumption and the real GDP decreases dramastically.
Answer:
11.25%
Explanation:
Tunbull Co. are planning to start a project that requires an initial investment of $1,708,000
The firm is able to raise $1,708,000 in capital by issuing an amount of $750,000 in debt
Before-tax cost is 10.2%
Preferred stock is $78,000 at 11.4%
The equity is $880,000 at a cost of 14.3%
Tax rate is 40%
The first step is to calculate the weight of preferred stock, weight of debt, weight of equity and after-tax cost of debt.
(a)Weight of preferred stock
= $78,000/$1,708,000
= 0.0457
(b)Weight of debt
= $750,000/$1,708,000
= 0.04391
(c) weight of equity
= $880,000/$1,708,000
= 0.5152
(d) After-tax cost of debt
= 10.2% × (1-25/100)
= 10.2% × ( 1-0.25)
= 10.2%×0.75
= 7.64
Therefore, the wacc can be calculated as follows
Wacc= (weight of debt×after-tax cost)+(weight of preferred stock×cost of preferred stock)+(Weight of equity×cost of equity)
= (0.4391×0.0765)+(0.0457×0.1140)+(0.5152×0.1430)
= 0.03359+0.0052+0.07367
= 0.1125×100
= 11.25%
Hence the wacc for this project is 11.25%
Answer:
B
Explanation:
When we talk of a decreasing cost industry, we refer to an industry in which the expansion of the industry will lead to a decrease in the unit production cost.
So with respect to the question at hand , the correct answer is that the input prices will fall as industry expands
The case of a a technological improvement is expected to drive a decrease in the input prices for production in the expanding industry
Answer:
6.91%
Explanation:
The formula for share price using the dividend growth model stated below can be used to determine the cost of equity as well whereby the formula is rearranged in order to make the cost of equity the subject as shown thus:
share price=expected dividend/(cost of equity-growth rate)
share price=$45
expected dividend=last dividend*(1+dividend growth rate)
expected dividend=$0.60*(1+5.5%)=0.633
cost of equity=the unknown
dividend growth rate=5.5%
45=0.633/(cost of equity-5.5%)
45*(cost of equity-5.5%)=0.633
cost of equity-5.5%=0.633/45
cost of equity=(0.633/45)+5.5%
cost of equity=6.91%
Answer:
$522,000
Explanation:
Given;
Cash proceeds on sale of land = $430,000
Cash proceeds on sale of equipment = $140,000
Purchase of treasury stock with cash = $53,000
Purchase of equipment with cash = $48,000
Issuance of common stock for cash = $70,000
To find the net cash provided by investing, the investing activities in the information given are; Cash proceeds on sale of land, Cash proceeds on sale of equipment, and Purchase of equipment with cash.
Purchase of treasury stock with cash and Issuance of common stock for cash are financing activities.
Net cash provided by investing activities = $430,000 + $140,000 - $48,000
= $522,000
The correct answer is $522,000 which is not a part of the options given.