Answer:
D. reduce economic efficiency; deadweight loss
Explanation:
Market failures are produced when in a free market context, individual decisions for the allocance of resources is inefficient, and produces deadweight loss, an economic measure of social welfare. This situation justifies in some cases government interventions. The most common tools for intervention are taxes, subsidies or price regulation.
Answer:
Growth = ROE * Retention ratio
Growth = 10% * 60%
Growth = 6%
Price of Stock = Dividend / (Capitalization Rate - Growth)
Price of Stock = 2/(15%-6%)
Price of Stock = 2 / 0.09
Price of Stock = 22.22
The stock will sell at per $22.22
PVGO = Stock Price - Earnings per share / Cost of Equity
PVGO = 22.22 - 5 / 15%
PVGO = 22.22 - 5 / 0.15
PVGO = 22.22 - 33.33
PVGO = -$11.11
Conclusion: Since Present Value of Growth Opportunities (PVGO) is negative, the ROE will decrease and share price will fall. So the investor can takeover the firm at lower price in future .
Answer: 1. Yes he should
2. Municipal.
Explanation:
1. Tom seems to have a lot of medical expenses coming up and so he should set aside as much as he can to cover them.
Another reason he should is that contributions to this type of account are treated as tax deductible. This means that not only does he get to cover his medical expenses, they can also reduce the taxes that he pays for the year.
2. Municipal Bonds are tax exempt and so Karen stands to gain by investing in Municipal Bonds given her tax bracket.
With her tax bracket, the interest earned on the Corporate bond would be,
After tax interest earned = 7% ( 1 - 0.35)
= 4.55%.
This is less than the 5% she would receive from the high quality Municipal bond so she should invest in the Municipal Bond.
The deferred tax liability is $3000.
<h3>How to calculate the information?</h3>
A deferred tax liability is a listing on a company's balance sheet that records taxes that are owed but are not due to be paid until a future date. The liability is deferred due to a difference in timing between when the tax was accrued and when it is due to be paid.
Based on the information given, the depreciation amount will be:
= $65000/5
= $13000
The depreciation amount under tax will be:
= $65000 × 40%
= $26000
The income under the tax accounting will be less than the income under the GAAP.
Therefore, the deferred tax liability will be:
= ($26000 - $13000) × 30%
= $3900
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Answer:
A reduction of top management's control of the budget process to one of oversight.
Explanation:
Budgeting can be defined as a financial plan which helps different organizations in the control of their various revenues. Budgeting can also be described as a forecast of how much a company expect to sell and also how much they expect to spend on various costs.
Advantages of budgeting include:
- It helps an organization to achieve their objectives and goals.
- It helps businesses to decide on essential areas to channel their resources to.
Disadvantages of budgeting include:
- a budget may be inaccurate because it is prepared on the basis of assumptions.
- it is expensive and consumes a lot of time.