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Slav-nsk [51]
3 years ago
7

Which of the following is not correct? Select one: a. Taxes levied on sellers and taxes levied on buyers are not equivalent. b.

A tax places a wedge between the price that buyers pay and the price that sellers receive. c. The wedge between the buyers’ price and the sellers’ price is the same, regardless of whether the tax is levied on buyers or sellers. d. In the new after-tax equilibrium, buyers and sellers share the burden of the tax.
Business
1 answer:
liq [111]3 years ago
8 0

Answer:

The correct answer is option a.

Explanation:

Taxes levied on either buyers or sellers are equivalent. In both cases, the tax creates a wedge. This wedge is the difference between the price that the buyers have to pay and the price that the sellers receive.  

The price that the buyers have to pay increases while the price that the sellers receive decreases. But this tax wedge does not depend on whom the tax is levied, it depends on the elasticity of demand and supply. So whether the tax is levied on buyers or sellers, the tax wedge will remain the same.

The tax burden will be shared between both buyers and sellers. So it is incorrect to say that the taxes levied on sellers and taxes levied on buyers are not equivalent.

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A parcel of real estate has been left to a woman through her husband's will for her use and enjoyment during her lifetime, with
wolverine [178]

Answer: A) Remainderman

Explanation:

A Remainderman may sound like something from a horror movie but it is a property law term that refers to a person that is billed to take over or inherit an estate after the LIFE ESTATE of the previous owner is terminated.

Life Estate is an agreement where a person owns a property or asset for the duration of their life but as soon as they pass on, the asset or property reverts back to the original owner of a THIRD party.

The Remainderman is the person who the property reverts to.

In the above scenario therefore, the woman is in possession of a Life Estate but the Stepson is the Remainderman.

7 0
3 years ago
If Wild Widgets, Inc., were an all-equity company, it would have a beta of 0.9. The company has a target debt-equity ratio of .4
Veronika [31]

Answer:

a. 6.5%

b. 13.06%

c. 10.91%

Explanation:

a.

Cost of debt of a bond is yield to maturity. Yield to maturity is the rate of return that a investor actually receives or a borrows actually pays on a bond. It is long term return or payment which is expressed in annual term.

Formula for yield to maturity is as follow

Yield to maturity = [ C + ( F - P ) / n ] / [ (F + P ) / 2 ]

By placing values in the formula

Assuming the bond face value is $1,000

Yield to maturity = [ (1000x7.2) + ( 1,000 - $1,090 ) / 20 ] / [ ( 1,000 + $1,090 ) / 2 ]

Yield to maturity = [ $72 + ( 1,000 - $1,090 ) / 20 ] / $1,045

Yield to maturity = [ $72 - $4.5 ] / $1,045

Yield to maturity = $67.5 / $1,045

Yield to maturity = 6.5%

So, the cost of Debt is 6.5%

b.

As 0.9 is the unlevered beta, We need Levered beta due to restructuring of capital.

Beta Levered = Beta Unlevered x ( 1 + ( 1 - tax rate ) x Debt / Equity)

Beta Levered = 0.9 x ( 1 + ( 1 - 0.35 ) x 0.4 )

Beta Levered = 1.134

Cost of equity can be calculated using CAPM

CAPM calculated the expected return on an equity investment based on the risk free rate, market premium and risk beta of the investment.

Formula for CAPM is as follow

Expected return = Risk free Rate + Beta ( Market premium)

As we know the Risk premium is the difference of market return and risk free rate.

Expected return = Risk free Rate + Beta ( Market Return - Risk free Rate )

Ra = Rf + β ( Rm - Rf )

Ra = 4.1% + 1.134 ( 12% - 4.1% )

Ra = 13.06%

Cost of Equity is 13.06%

c.

WACC is the average cost of capital of the firm based on the weightage of the debt and weightage of the equity multiplied to their respective costs.

According to WACC formula

WACC = ( Cost of equity x Weightage of equity )+ ( Cost of debt ( 1- t) x Weightage of debt )

Placing the values in formula

If the debt to equity 0.4  the equity value should be 1 and total capital is 1.4 ( 1 + 0.4 )

WACC = ( 13.06% x 1 / 1.4 )+ ( 6.5% ( 1- 0.35) x 0.4 / 1.4 ) = 9.71% + 1.2% = 10.91%

WACC is 10.91%

4 0
3 years ago
Accrued Product Warranty Fosters Manufacturing Co. warrants its products for one year. The estimated product warranty is 4% of s
Finger [1]

Answer:

a.

Date                     Account Title                                          Debit             Credit

Jan. 31                 Product Warranty Expense                 $15,160

                            Product Warranty Payable                                        $15,160

<u>Working:</u>

Product warranty expense = Amount of sales for January * Estimated product warranty

= 379,000 * 4%

= $15,160

b.

Date                     Account Title                                          Debit             Credit

Jan. 31                 Product Warranty Payable                     $355

                            Supplies                                                                     $250

                            Wages payable                                                          $105

The costs of the warranty will be taken from the liability account for warranties  because the warranty payable account represents that the company owes warranty repairs which the customer just came to collect.

5 0
3 years ago
If buyers in this market have to wait in line to purchase this good after a $1 price ceiling is imposed, each buyer purchases on
Sophie [7]

The waiting time will be 30 minutes because 30 minutes at $8 per hour adds $4 to the price. Therefore, making the full price equal to $5 for each buyer clears the market.

<h3>What is the price ceiling?</h3>

A price ceiling is a price control mechanism by the government to intervene in the market forces of demand and supply by setting a maximum price.

While price ceilings are imposed to make prices low for consumers, it may cause shortages in the quantities supplied.

Thus, the waiting time will be 30 minutes because 30 minutes at $8 per hour adds $4 to the price.

Learn more about price ceilings at brainly.com/question/4120465

#SPJ12

3 0
1 year ago
The terms of a business combination can provide that former shareholders of the acquired firm may receive additional compensatio
Art [367]

Answer:

No, they wouldn't.

Explanation:

Any extra compensation to former stockholders of an acquired company which is based on post-combination share price or post-combination profits cannot be recognized as adjustments in the price of business combinations.

The reason for this is that changes in the fair value of contingent consideration (in case something happens) after the company has been acquired, e.g. achieving certain profits or stock price, are not considered period adjustments, therefore they cannot be included in the cost of the business combination (acquisition).

5 0
3 years ago
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