Currently, U.S. currency is fiat money with no intrinsic value. Thus the correct answer is B.
<h3>What is intrinsic value?</h3>
Based on the cash flows from an investment, intrinsic value calculates its worth. The difference between market value and intrinsic value is that the first tells you how much other people are prepared to pay for an item, while the latter reveals the asset's worth based on an examination of its real economic performance.
It can be used for purposes other than serving as a means of exchange, commodity money has intrinsic worth. Fiat money has no intrinsic value and is only used as a means of exchange because the government has sanctioned its use in that capacity.
Therefore, option B fiat money with no intrinsic value is the appropriate answer.
Learn more about intrinsic value, here:
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Answer: The correct answer is "B. present value of all of the future cash flows that will be received".
Explanation: The value of a financial asset is the present value of all of the future cash flows that will be received.
To value a financial asset, all future cash flows must be taken into account, therefore their value will be the sum of the present values of each of the future cash flows.
I think it is Carry a risk of losing money (A)
Answer:
a. 4.94%
b. 11.48%
Explanation:
Here in this question, we are interested in calculating the pretax cost of debt and cost of equity.
We proceed as follows;
a. From the question;
The debt equity ratio = 1.15
since Equity = 1 ; Then
Total debt + Total equity = 1 + 1.15 = 2.15
Mathematically ;
WACC = Cost of equity x Weight of equity + Pretax Cost of debt x Weight of debt x (1-Tax rate)
Where WACC = 8.6%
Cost of equity = 14%
Weight of equity = 1/(total debt + total equity) = 1/(1+1.15) = 1/2.15
Pretax cost of debt = ?
Weight of debt = debt equity ratio/total cost of debt = 1.15/2.15
Tax rate = 21% = 0.21
Substituting these values, we have;
8.6% = 14% x 1/2.15 + Pretax cost of debt x 1.15/2.15 x (1-21%)
8.6% = 14% x 1/2.15 + Pretax cost of debt x 1.15/2.15 x (1-21%)
Pretax cost debt = (8.6%-6.511628%)/(1.15/2.15 x (1-21%))
Pretax cost of debt = 4.94%
b. WACC = Cost of equity x Weight of equity + After tax Cost of debt x Weight of debt
8.6% = Cost of equity x 1/2.15 + 6.1% x 1.15/2.15
Cost of equity = (8.6%-3.26279%)/(1/2.15)
Cost of equity = 11.48%
