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saw5 [17]
3 years ago
13

What is the definition of shortage in economics

Business
1 answer:
gtnhenbr [62]3 years ago
7 0

Answer:

A shortage, in economic terms, is a condition where the quantity demanded is greater than the quantity supplied at the market price. There are three main causes of shortage—increase in demand, decrease in supply, and government intervention

You might be interested in
If Wild Widgets, Inc., were an all-equity company, it would have a beta of 1.05. The company has a target debt-equity ratio of .
Serga [27]

Answer:

WACC is 10.18%

Explanation:

In order to compute the WACC for Wild Widgets,Inc,we need first of all ascertain the cost of debt kd and the cost of equity ke.

The cost of debt is the same the yield to maturity where yield to maturity can be computed using rate formula in excel:

=rate(nper,pmt,-pv,fv)

nper is  the number of years before maturity which is 30

pmt is the coupon payable on the bond,6.1%*$1000=$61

pv is the current price of the bond at $1,055

fv is the face value of the bond at $1,000

=rate(30,61,-1055,1000)

rate=5.71%

pretax cost of debt is 5.71%

In order to calculate levered cost of equity,we need to re-lever the beta value of 1.05 using the below formula:

Levered β = Unlevered β ×(1 + [(D/E) × (1−t) )

Unlevered β=1.05

D/E=0.55

tax=tax =24%=0.24

Levered β=1.05*(1+(0.55)*(1-0.24)

                =1.05*(1+(0.55)*(0.76)

                =1.49

Levered cost of equity is then computed using the levered beta of 1.49

      Ke=risk free rate+Levered beta*(market return-risk-free rate)

risk free rate is 3.2%          

market return is 10%

ke=3.2%+1.49(10%-3.2%)

ke=13.33%

WACC=Ke*(E/V)+Kd*(D/V)*(1-t)

Ke is 13.33%

kd is 5.71%

D/E=0.55=0.55/1 which means that debt has 0.55 equity has 1

D/V=D/E+V=0.55/1+0.55=0.35

E/V=E/E+V=1/(1+0.55)=0.65

WACC=13.33%*0.65+5.71%*(0.35)*(1-0.24)

           =13.33%*0.65+5.71%*(0.35)*(0.76)

           =0.086645 +0.0151886

           =10.18%

           

6 0
3 years ago
What’s the present value of a $900 annuity payment over five years if interest rates are 8 percent? (Do not round intermediate c
MAXImum [283]

Answer:

$3,593.44

Explanation:

The present value (P) of an annuity payment (A) at an annual rate 'r', compounded annually over of period of 't' years, is given by:

P=A*\frac{1-(1+r)^{-t}}{r}

If payments are $900 each at an 8 percent rate for five years, the present value is:

P=900*\frac{1-(1+0.08)^{-5}}{0.08}\\P=\$3,593.44

The present value of the annuity payment is $3,593.44

6 0
3 years ago
Insurance premiums are calculated by analyzing clients’ potential level of risk. Which of the following drivers would most likel
siniylev [52]

Answer:

The correct answer is letter "B": Experienced driver with a good driving record.

Explanation:

Insurances do take into consideration the level of risk individuals represent according to the type of coverage they apply for. While talking about car insurance, <em>an experienced driver with a good driving record represents a minimum risk for the company, thus, the individual will likely pay a lower premium than someone who has had several vehicle accidents with a negative driving history.</em>

7 0
4 years ago
The aging schedule at December 31, 2020, for Gidget Inc. shows the following breakdown of total accounts receivable. Status Amou
natali 33 [55]

Answer:

The amount to be debited to bad debt expense to adjust for allowance for doubtful accounts is $2,275, recorded as follows:

Debit Bad debt expense                               $2,275

Credit Allowance for doubtful accounts      $2,275

<em>(To recognize bad debt expense for the year)</em>

Explanation:

The aging schedule of Gidget Inc. as at December 31, 2020

Status                                 Amount           Credit loss rates   Estimated Bad debt

Not past due                   $455,000                   0.5%                     $2,275

Past due 1 - 30 days        $108,000                      1%                      $1,080

Past due 31 - 60 days       $55,000                      2%                      $1,100

Past due over 60 days      $14,000                      8%                      $1,120

Total                                 $632,000                                               $5,575

Since the balance in allowance for doubtful accounts is $3,300 credit, the bad debt expense would therefore be $2,275 ($5,575 - $3,300).

7 0
3 years ago
The XYZ Company is collaborating with a competitor on a globally based opportunity for mutual benefit, but the two competitors a
eimsori [14]

Answer:strategic alliance

Explanation: A strategic alliance agreement or arrangements that allows two or more parties to agree on a set of objectives which are mutually beneficial to them while remaining independent and not investing in one another . The agreement/ rules of the buisness is less complex and companies enter into it so as to expand into a new market, improve thier production line or be more competitive over a competitor. The arrangement allows businesses to work toward a common goal while benefiting themselves.

Most of the time, Strategic alliances are formed if they provide an advantage to all the parties involved . The following are some advantages that can lure companies enter the his alliance

--organizational advantages

This occurs when company can learn necessary methods and processes and obtain certain privileges from his partner. especially If the company is new or lacks experience certain industry, having a strategic partner who isrespected will add credibility to your buisness Another is Economic advantage is that A Company can reduce costs and risks by distributing it's alliance partners . You can also obtain greater economies of scale in an alliance, leading to production increase.

3 0
3 years ago
Read 2 more answers
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