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3 years ago

What are the two risk components that determine a firm's cost of equity?

1 answer:

5 0

Traditionally, the formulas used to express a firm's cost of equity are the dividend capitalization model and the capital asset pricing model (CAPM).

Explanation:

Generally, two risk components determine a firm's cost of equity. The first is the systematic risk associated with the broader equity market. All firms are exposed to this risk, and it cannot be mitigated through diversification.

The second risk component is the unsystematic risk associated with the firm in question. This risk, often reflected as beta, a measure of the stock's volatility in relation to the volatility of the broader market, can be mitigated via diversification.

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If the MPC in an economy is 0.8, government could close a recessionary expenditure gap of $100 billion by cutting taxes by

QveST [7]

Answer:

cutting taxes by $125 billion

Explanation:

given data

economy = 0.8

expenditure gap = $100 billion

to find out

cutting taxes

solution

we get here cutting or reduce taxes that is express as

cutting taxes = $\frac{expenditure\ gap}{MPN\ economy}$ ......................... 1

cutting taxes = $\frac{100}{0.8}$

solve we get cutting taxes

cutting taxes = $125 billion

so cutting taxes by $125 billion

8 0

3 years ago

The Economy Tomorrow Suppose a person who is developing an app crowdfunds $15,000 and holds this as cash for future expenses. If

Natali [406]

Answer:

Question 1)

Decrease in money supply = Decrease in checking account / Required reserves ratio

Decrease in money supply = $25,000 / 0.05

Decrease in money supply = $500,000

NOTE: As per Answering Policy, first question is answered.

Explanation:

Question 1)

Decrease in money supply = Decrease in checking account / Required reserves ratio

Decrease in money supply = $25,000 / 0.05

Decrease in money supply = $500,000

NOTE: As per Answering Policy, first question is answered.

5 0

3 years ago

To determine whether their employees are doing their jobs efficiently and effectively, managers use:_______

statuscvo [17]

In order to find out if employees are doing their job as they should in an efficient and effective manner, managers use performance management.

<h3>What is performance management?</h3>

This refers to anything that employers do in order to find out how employees are doing as regards helping the company to meet its organizational goals.

These methods go beyond trying to find out how employees are doing as regards work, but also tries to suggest ways that the employees can get better at what they do.

In order to do this, the employees need to be monitored and the process they use to go about their jobs need to be studied. They are then juxtaposed with industry best practicies to make them better.

Performance management is therefore hugely important in companies as it ensures that they meet organization objectives.

In conclusion, this is performance management,

Find out more on performance management at brainly.com/question/24673911

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7 0

2 years ago

Tobin Supplies Company expects sales next year to be $520,000. Inventory and accounts receivable will increase $90,000 to accomm

elena-s [515]

Answer:

$17,200

Explanation:

Calculation to determine How much external financing will Tobin Supplies Company have to seek

Net Income=[$520,000 x 20%]

Net Income = $104,000

Dividend Pay-out= [$104,000 x 30%]

Dividend Pay-out = $31,200

Additions to Retained Earnings = [$104,00 - $31,200]

Additions to Retained Earnings=$72,800

Now let determine the The External Financing Needed using this formula

The External Financing Needed = Increase in Assets – Additions to retained earnings

Let plug in the formula

The External Financing Needed= $90,000 - $72,800

The External Financing Needed= $17,200

Therefore The External Financing Needed is $17,200

7 0

3 years ago

What is the relationship of a single firm's demand curve in a purely competitive industry?

pav-90 [236]

Pure competition or perfect competition is where all firms have full knowledge of what is going on in the market, where there is free flow of information between not only the producers, but also with the consumers.

As such, all firms have no dominant share of market power since each individual firm is able to produce the good of the same quality and quantity (factors of production are fluid, and no costs in transportation in this theory). And at the same time, consumers have full knowledge of the quality of good they are getting and hence no firm will be able to exploit the misinformation of a good for its own profits.

This builds up to the point of a perfectly elastic demand curve, where consumers know what amount and at which price point do they value the product at. And knowing for the fact that small individual firms in a purely competitive firm have no say over prices, they become the price takers for this kind of market. Thus where MB=MC, the equilibrium point is reached and it is also at the socially optimal level since all consumers have full knowledge of the pros and cons of consuming a product (hence no externalities).

Hope this helps!<span />

6 0

3 years ago