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adelina 88 [10]
3 years ago
13

The required return on equity for an all-equity firm is 10.0 percent. They are considering a change in capital structure to a de

bt-to-equity ratio of 1/2, the tax rate is 40 percent, the pre-tax cost of debt is 8 percent. Find the new cost of capital if this firm changes capital structure.
Business
1 answer:
Sladkaya [172]3 years ago
5 0

Answer:

The new cost of capital if this firm changes capital structure is 1.3

Explanation:

From the provided information:

All equity beta = 1

New D/E ratio = 0.5

Then, the new capital structure with levered beta is given by:

new capital structure  = All equity beta *(1 + D/E*(1 - tax rate))

                                     = 1*(1 + 0.5*(1 - 40%))

                                     = 1.3

Therefore, The new cost of capital if this firm changes capital structure is 1.3

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Answer:

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Explanation:

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3 years ago
Read 2 more answers
Gamma is a company that develops software to help businesses with data processing. Their software performs multiple business fun
Alexus [3.1K]

Cloud computing technology is being used by Gamma to perform the computing tasks for other businesses.

Explanation:

Cloud computing is the on-demand availability of computer system resources, data storage and computing power, without direct active management by the user. This term is used to determine data centers available to many users over the internet.

Cloud computing is a software performs multiple business functions like processing payrolls, generating tax information for employees, and managing performance evaluation reports. The software is hosted on a remote maintained by the Gamma, and client businesses can access it online.

The information and data is stored on physical or virtual servers, which are maintained and controlled by cloud computing provider such as Amazon and AWS product.

7 0
3 years ago
Werner installs custom sound systems in cars. If he installs seven systems per day, his total costs are $300. If he installs eig
sergiy2304 [10]

Answer:

$100

Explanation:

Total cost if he installs seven systems = $300

Total cost if he installs eight systems = $400

Therefore, the marginal cost of installing 8th system is the difference between the total cost of installing eight systems and the total cost of installing seven systems.

Marginal cost of installing 8th system:

= Total cost of installing 8 systems - Total cost of installing 7 systems

= $400 - $300

= $100

The profit maximization conditions says that the marginal cost must be equal to the marginal revenue.

Hence,

William will install eight systems per day only if the eight customer is willing to pay at least $100.

8 0
3 years ago
Tara invests $2,500 today and another $1,500 a year from now. Her investments starting year 2 keeps increasing by $100 every yea
Neko [114]

Answer:

$61,175

Explanation:

Base on the scenario been described in the question, we expected to solve for the future worth

The table of the cash flow is shows in the picture

We can find that by calculating the Future worth

Future Worth = {2,500 + 1,500(P/A 7%,10) 100 + (P/G 7%,10) } [F/P 7%, 20]

Future worth = { 2,500 + 1500(7.024) + 100(27.716)}

Future worth = $61,175

6 0
3 years ago
" what demographic and psychographic changes are creating business opportunities for new ventures
kkurt [141]
A major one is the increase in globalization.

now a days people can talk to anyone in any part of the world at any time they want for free and within an instant of when they think of it. Bills and payments can be made from the tap of a button. Someone can stay in their house there entire life and have everything they ever needed. this is being translated to the business world in massive ways.
4 0
3 years ago
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