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solmaris [256]
3 years ago
12

Which of the following statements is MOST correct?A. Because the cost of debt is lower than the cost of equity, value-maximizing

firms maintain debt ratios of close to 100%.B. Corporations that are 100% equity financed will have a much lower weighted average cost of capital because the lack of debt lowers their risk of bankruptcy.C. The source of capital with the lowest after-tax cost is preferred stock, because it is a hybrid security, part debt and part equity.D. The cost of a particular source of capital is equal to the investor's required rate of return after adjusting for the effects of both flotation costs and corporate taxes.
Business
1 answer:
Mama L [17]3 years ago
5 0

Answer:

B. Corporations that are 100% equity financed will have a much lower weighted average cost of capital because the lack of debt lowers their risk of bankruptcy.

Explanation:

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A corporation issued 8% bonds with a par value of $1,000,000, receiving a $20,000 premium. On the interest date 5 years later, a
Mrac [35]

Answer:

$22,000 gain.

Explanation:

Please see attachment

3 0
3 years ago
What will happen to the trade balance and the real exchange rate of a small open economy when government purchases increase, as
kkurt [141]

Answer: When a government purchase increases during a war, be it a local war or a world war. it means that it's savings has reduced, therefore the trade balance will fall. And if the purchase is done to import more goods into the country, the trade balance becomes negative, leading to a deficit.

The exchange rate of the currency will reduce because the country the government is making more currency to be available and surplus, by increasing it's purchase. When they is excess currency in the world market, the currency reduces it value. In a world war, or local war, the exchange rate may not actually reduce because, it will be difficult for the country to have enough money to make its currency to be available in the world market.

7 0
3 years ago
Swifty Corporation has 46,500 shares of $13 par value common stock outstanding. It declares a 15% stock dividend on December 1 w
Olin [163]

Answer:

Common stock dividend distributable = Par * Number of shares * % dividend

= 13 * 46,500 * 15%

= $90,675

Stock Dividend = Number of shares * market price * % dividend

= 46,500 * 18 * 15%

= $125,550

Date          Account Title                                                 Debit               Credit

Dec, 1        Stock Dividend                                          $125,550

                 Common Stock Dividend Distributable                            $90,675

                  Paid in Capital in excess of Par-                                       $34,875

                  Common stock

Date          Account Title                                                 Debit               Credit

Dec, 31      Common Stock Dividend Distributable     $90,675

                 Common Stock                                                                  $90,675

4 0
2 years ago
Colgate-Palmolive Company has just paid an annual dividend of . Analysts are predicting dividends to grow by per year over the n
denis23 [38]

The amount of $97.85 is the price that​ dividend-discount model predict that Colgate stock should sell for​ today

<u>Given Information</u>

Current dividend (D0) = $1.59

   

Dividend payments for next five years includes:

D1 = 1.59 +0.18

D1 = 1.77

   

D2 = 1.77 +0.18

D2 = 1.95

D3 = 1.95 +0.18

D3 = 2.13

D4 = 2.13 +0.18

D4 =2.31

D5 = 2.31 +0.18

D5 =2.49

Year  Cash Flow         PVF at 8.1%        Present value

1            1.77                0.92506938        1.637372803    

2           1.95                0.855753358      1.668719048

3           2.13                0.791631229        1.686174517    

4           2.31                0.73231381           1.691644901    

5           2.49               0.677441082        <u>1.686828295</u>

Present value of Dividends                   <u>8.3707</u>

PV of remaining dividends in 5 year = D5 x (1+g)/(Ke-g))      

PV of remaining dividends in 5 year = 2.49(1+0.061)/(0.081-0.061)    

PV of remaining dividends in 5 year = $132.0945

Given that g=6.1%, ke=8.1%      

PV of remaining dividends in year = 0 = PV of the remaining dividends in year 5* 1/(1+0.081)^5

= 132.0945 * 1/(1+0.081)^5    

= $89.48624      

As per dividend-discount model, Colgate stock should sell for​ today = PV of Dividends till 5th year + PV of Remaining Dividend at t=0

= $89.48624 + $8.3707    

= $97.8531

= $97.85

Hence, the amount of $97.85 is the price that​ dividend-discount model predict that Colgate stock should sell for​ today.

Read more about dividend

<em>brainly.com/question/3161471</em>

8 0
2 years ago
The market for chewing gum is in equilibrium with a current price of 50 cents per pack and a quantity of 100,000 packs per day.
frez [133]

Answer:

A) an increase in the price of other kinds of candy

Explanation:

If the price of substitute products (other types of candy) increases, then the suppliers of chewing gum can increase their price without the quantity demanded decreasing. If the decrease in the price of chewing gum is smaller than the increase in the price of substitute products, the quantity demanded will increase.

If there was a price increase of the main ingredients used to produce chewing gum, then the supply curve would shift to the left (option B is wrong).

If the workers signed an agreement that lowered their wages, then the supply curve would shift to the right (option C is wrong).

A decrease in the number of young people in the market would decrease the quantity demanded for chewing gum, which in turn would decrease the equilibrium price (option D is wrong).

A decrease in income would also decrease the quantity demanded, which would in turn decrease the equilibrium price (option E is wrong).

5 0
3 years ago
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