Answer:
$20.38 buy
Explanation:
The computation of present value is shown below:-
Fair Value according to Gordon Model = Expected Div ÷ (Required Return - Growth rate)
= $1.63 ÷ (10.5% - 2.5%)
= $1.63 ÷ 8%
= $20.38
Fair Price = $ 20.38 and Actual Price = $18.00
As Fair Price is greater than the Actual Price so, the stock is under priced. Therefore advice to buy.
Answer:
Winners
- 3rd National, a bank that loaned many people money for home purchases.
Losers
- Karen, a retired school teacher that relies upon her fixed pension to pay for her expenses.
- Herb, who keeps his savings in an old coffee can.
- Joy, who has borrowed $40,000 to pay her college education.
- The US federal government which had almost $15 trillion in debt in 2011.
Explanation:
When unexpected inflation occurs, the usual plan to by Monetary Institutions of a country is raising the interest rates.
By doing that, they want to stop it or slowly decelerate it.
So that it becomes more expensive to take a loan, the idea is to reduce consumption.
In Economics, it's a bad scenario after all. Few winners. Many losers.
So, let's examine them
Winners
- 3rd National, a bank that loaned many people money for home purchases.
At first, The 3rd National is going to be winning since the value of the debt will rise, depending on the type of contract and an increase in the interest rate will demand corrections on the monthly payments. But on the other hand, the number of default clients and overdue installments will raise for sure.
Losers
- Karen, a retired school teacher that relies upon her fixed pension to pay for her expenses.
Inflation reduces the real buying value of her checks. And her pension can't grow otherwise this will feed the inflation too.
- Herb, who keeps his savings in an old coffee can.
Since his money is not invested then He's not having any earning that might give him some compensation. So his money is even more devalued.
- Joy, who has borrowed $40,000 to pay her college education.
Depending on the contract Joy might be sleepless. Either her monthly payments will become more expensive or She may experience difficulties because of the weekly growing prices.
- The US federal government had almost $15 trillion in debt in 2011.
Certainly, the president and his secretary will have to address the fact that due to inflation and the chosen medicine make the nation's debt up to the sky. They must renegotiate the payment deadlines.
Answer:
a good decision requires that we recognize both viewpoints
Explanation:
Based on this information it can be said that an economist would most likely state that a good decision requires that we recognize both viewpoints. That is because every decision will affect everyone, but some individuals will be affected positively while others will be affected negatively. Therefore trying to recognize the viewpoint of both sides will allow for decisions that are as fair as possible to both sides.
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:
Increases; Rise
Explanation:
In the market for reserves, if the federal funds rate is between the discount rate and the interest rate paid on excess reserves, an increase in the reserve requirement increases the demand of reserves and causes the federal funds interest rate to rise, everything else held constant.
