Answer:
Existing Equity = 20 million
Existing debt = 60 million
Total capital = 20 million + 60 million = 80 million
a. Given company issued 30 million of equity to retire debt
Equity after raise = $20 million + $30 million = $50 million
Debt = $60 million - $30 million = $30 million
Total capital size remain at $80 million
Capital structure, Equity = $50 million/$80 million = 0.625 = 62.50%
Debt = (1-0.625) = 0.375 = 37.50%
b. The market would welcome the new issue as the risk of the firm would be reduced.
The lower cost or market approach is (C) required under GAAP for companies that use LIFO or retail inventory.
<h3>
What is market approach?</h3>
- The market approach is a method of evaluating an asset's worth based on the selling price of comparable assets.
- Along with the cost technique and discounted cash-flow analysis, it is one of three main valuation methodologies (DCF).
- Companies that use LIFO or retail inventory are obligated by GAAP to use the lower cost or market method.
- A realtor, for example, can gather information on comparable real estate sales in close vicinity to a client's property and modify those values to account for differences in land area and building square footage to arrive at a market-based valuation for the targeted property.
Therefore, the lower cost or market approach is (C) required under GAAP for companies that use LIFO or retail inventory.
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The complete question is given below:
The lower cost or market approach is _____ for companies that use _____.
a. optional under GAAP; LIFO or the retail inventory
b. optional under GAAP; any method of inventory valuation
c. required under GAAP; LIFO or the retail inventory
d. required under GAAP; any method of inventory valuation
Answer: .A) nontariff trade barrier
Explanation:
A Non-Tariff trade barrier as the term implies, refers to measures apart from the imposition of tariffs meant to protect local businesses in a country by restricting the trade of international products in that same country.
Such measures include but are not limited to,
• Quotas,
• Levies,
• Embargos, and
• Sanctions etc
Answer:
Average rate of return= 10.17
%
Geometric return = 9.23%
Explanation:
<em>Geometric average return</em>
This is compounded annual rate of return which is used to measure the performance of an asset over a certain number of years. It helps to measure the return generated by an investment taking into account the volatility .
Unlike the arithmetic average the geometric average gives an idea of the real rate taking into account of volatility
The formula below
Geometric Return =(1+r1) (1+r2) ...... (1+rn)^1/n
Geometric Average return =
(1.12× 1.19× 1.21× 0.88× 1.26× 0.95)^(1/6) - 1 =0.09233168
Geometric return =0.0923
× 100= 9.23%
Geometric return = 9.23%
Average rate of return
<em>The average return is the sum of the returns over the years dividend by the Numbers of returns</em>
Average return = sum of return / No of returns
(12% + 19% + 21% + (12%) + 26% + (5%))/6 =10.17
%
Average rate of return= 10.17
%
Geometric return = 9.23%
Answer:
The correct answer is option a and c.
Explanation:
The fed cannot control the money supply up to a great extent in the real world. This is because the feds can control the amount of required reserves that a commercial bank holds. But they cannot control the amount of excess reserves that a bank decides to hold which affects the money supply.
At the same time, the feds cannot control the amount of money that the households decide to hold as currency which also affects the money supply.
The amount of excess reserves a bank decides to hold affects the deposit-reserve ratio. While the amount of money that households decide to hold affects the currency deposit ratio. Both of these ratios affect the money supply.
