Answer:
Externalities can be defined as those activities that incurs cost on another party.
Road congestion creates externalities such as increased time for travel, more pollution in a city, more likelihood of accidents, more stress for road users.
This externaliity is caused because road users think of the private benefits that they can get from using the road but they do not take the social cost into account. We have lots of drivers on the road and non of these drivers takes cognizance of the cost that other drivers get because of this.
If road are private, congestion is going to fall and there would be excludability. But this is a public good, turning it to a private good would cause issues. Private markets benefits out is positive externalities.
Answer:
C. Partnership Agreement
Explanation:
It's the legal document that dictates the way a business is run and details the relationship between each partner.
Answer:
NPV = $74,951.80
Explanation:
The net present value is the present value of after tax cash flows from an investment less the amount invested.
NPV can be calculated using a financial calculator:
Cash flow in year 0 = $700,000
Cash flow each year from 1 year 8 = $156,000
I = 12%
NPV = $74,951.80
To find the NPV using a financial calacutor:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. After inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.
3. Press compute
I hope my answer helps you
Answer:
A.
Compensating balances are used by banks as a substitute for charging service fees
Explanation:
Compensating balance is the amount of money that a customer who uses the bank's services, has to keep in an account. The purpose of this money will be to offset the cost incurred by the bank in the course of making its services available to the customer.
Answer:
B. Accept X and reject Y
Explanation:
Here are the options
A. Accept both X and Y
B. Accept X and reject Y
C. Reject X and accept Y
D. Reject both X and Y
E. The answer cannot be determined based on the information provided
the project should be accepted if the WACC of the department is less than the rate of return on the project
WACC = weight of equity x cost of equity + weight of debt x after tax cost of debt
weight of debt = D / (D + E) = 0.45E /1.45E
weight of equity = E / (D + E) = E / 1.45E
WACC = ( 0.45E /1.45E) x (5.1) + ( E / 1.45E) x 14.7
= 5.1 x (0.45/1.45) + 14.7 x (1/1.45)
=1.583 + 10.138
11.72%
Division X's WACC = 11.72% - 0.5% = 11.22%
Division Y's WACC = 11.72% + 1% = 12.72%
The rate of return of Division Y's project is 12.3%. Thus, division Y's project should not be accepted
the rate of return of Division X's project is 11.64%. Thus, division X's project should be accepted
