The distinction between supply and the quantity supplied is best made by saying that___________.
1 answer:
Answer:
b. supply is represented graphically by a curve and quantity supplied as a point on that curve.
Explanation:
Qunatity supplied shows how qunatity of a product changes in response to changes in price of that good. According to the law of supply, the higher the price of good, the higher the quantity supplied and the lower the price of a good, the lower the quantity supplied. This shows that quantity supplied has a direct relationship with price.
Changes in quantity supplied is shown by movement along a supply curve.
Changes in supply is caused by other factors other than changes in price. Some of these factors are :
Changes in price of similar goods
Tax
Change in number of suppliers
Technological advancement
Changes in supply is shown by movement of the supply curve either to the left or to the right and not a movement along the supply curve.
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Answer:
Re = 16.02%
Explanation:
current stock price 36 x 7,660,000 = 275,760,000
cost of equity = 17.5%
current short term debt = 141,600,000
cost of short term debt = 8.5%
current long term debt = 210,600,000
cost of long term debt = 10.5%
total financing = 627,960,000
- equity = 275,760,000 / 627,960,000 = 0.4391
- short term debt = 141,600,000 / 627,960,000 = 0.2255
- long term debt = 210,600,000 / 627,960,000 = 0.3354
WACC = (0.4391 x 0.175) + (0.2255 x 0.085 x 0.75) + (0.3354 x 0.105 x 0.75) = 0.0768 + 0.0144 + 0.0264 = 0.1176 or 11.76%
under the new structure:
total financing = 627,960,000
- equity = 325,760,000 / 627,960,000 = 0.5188
- short term debt = 141,600,000 / 627,960,000 = 0.2255
- long term debt = 160,600,000 / 627,960,000 = 0.2557
assuming WACC remains unchanged:
0.1176 = (0.5188 x Re) + (0.2255 x 0.085 x 0.75) + (0.2557 x 0.105 x 0.75) = (0.5188 x Re) + 0.0144 + 0.0201 = (0.5188 x Re) + 0.0345
0.5188 x Re = 0.1176 - 0.0345 = 0.0831
Re = 0.0831 / 0.5188 = 0.1602 or 16.02%
