Central Systems desires a weighted average cost of capital of 12.7 percent. The firm has an aftertax cost of debt of 4.8 percent
1 answer:
Answer:
Debt-equity ratio = 0.34 or 34%
Explanation:
Weighted average cost of capital (WACC) = 12.7%
Cost of debt = 4.8%
Cost of equity = 15.4%
Let 'We' and 'Wd' be the fraction of capital corresponding to equities and costs, respectively, and that We + Wd =1.
The weighted average cost of capital is given by
The debt-equity ratio is:
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Answer:
500
Explanation:
please find attached the table referred to in this question and a second table where marginal cost is included
A perfect competition is characterised by many buyers and sellers of homogeneous goods and services. Market prices are set by the forces of demand and supply.
in a perfect competition, price = marginal cost = marginal revenue
Marginal cost = total cost 2 - total cost 1
e.g. marginal cost at 2 units of output = $7 - $2 = $5
Hank and Helen would supply at the point where marginal cost is equal to $5.
looking at the second attached table, there are two points where marginal cost is equal to $5. at output 1 and output 5.
at output one, Hank and Helen would be earning a loss because total cost is greater than total revenue. so they would not supply at this point.
at output five, Hank and Helen would earn a profit and thus would supply at 5 units of output.
Since all firms face and identical cost structure, the industry supply would be 100 x 5 = 500 pounds
