Answer and Explanation:
The computation is shown below:
Debt = D ÷ (E + D)
= 0.8 ÷ (1 + 0.8)
= 0.4444
Now
Weight of equity = 1 - Debt
= 1 - 0.4444
= 0.5556
As per Dividend discount model
Price = Dividend in 1 year ÷ (cost of equity - growth rate)
40 = $2 ÷ (Cost of equity - 0.06)
Cost of equity = 11%
Cost of debt
K = N
Let us assume the par value be $1,000
Bond Price =∑ [(Annual Coupon) ÷ (1 + YTM)^k] + Par value ÷ (1 + YTM)^N
k=1
K =25
$804 =∑ [(7 × $1000 ÷ 100)/(1 + YTM ÷ 100)^k] + $1000 ÷ (1 + YTM ÷ 100)^25
k=1
YTM = 9
After tax cost of debt = cost of debt × (1 - tax rate)
= 9 × (1 - 0.21)
= 7.11
WACC = after tax cost of debt × W(D) + cost of equity ×W(E)
= 7.11 × 0.4444 + 11 × 0.5556
= 9.27%
As we can see that the WACC is lower than the return so it should be undertake the expansion
D. 16,110
39,000+9,250=48,250
48,250-(850+290)=47,110
47,110-31,000=16,110
Answer: Consultants
Explanation: They give their ideas and the company works according to that. If the company managers take decisions that suits them the employees and owners will adhere but the consultants might turn it down which affects the company immensely.
Option D is true, the price of the good sold will rise under either policy and there will be a reduction in the level of production
Explanation:
Carbon-free is an effective way, even though the economy puts a monetary price above it and gives a value to the actual cost. Since the pollutant price is still in place, polluters are motivated to reduce pollution and to decide how far the gasses are produced.
In comparison, the restriction or cap on pollution can be published from industry by the cap-and-trade system. This limit is decreased in many cases after the pollution goal is met. If this is the case, the law requires polluters to buy the remaining quota from others with low emissions and generate more than the allotted quota.
Both methodologies will increase the cost of the good generated because it is distortionary. Production should however be decreased because of the control of pollution.