Explanation:
poor network , poor electircity
Answer:
(a) increase its dividend;
dividends are increased for two reasons:
- the company has excess cash and it doesn't have any possible investments on hand
- the board and upper management want to increase the stock price and higher dividends always result in higher stock prices, even if it is only in the short run.
(b) buy back some of its common stock shares;
- the company has excess cash and the board and upper management believe that the stock price is too low.
(c) pay down some of its debt;
- the company has excess cash and it considers that the cost of its debt is too high and it can get cheaper financing from other sources if needed.
(d) increase its use of internal financing;
- the board and upper management considers that the company needs to invest in new or existing projects and they consider that the financing costs are too high. Also, on the long run if things work well, the stock price should increase.
(e) take the public firm private
- the company has excess cash and the board and upper management believe that the stock price is too low. It is similar to (b) only on an extreme situation.
Answer:
1. Equilibrium price ,p = $1.20 per pound, equilibrium quantity = 95 million pounds.
2. Surplus = 0
Explanation:
1. From the question,
the equilibrium price = 1.20
The equilibrium quantity = 95 million per pounds.
Equilibrium is gotten when Quantity supplied = quantity demanded.
2. When price floor == $1.00
Quantity demanded = 101
Quantity supplied = 79
Monthly surplus = 79 - 101 = -22
Quantity demanded > quantity surplus.
This implies that there is no surplus.
Surplus = 0
3. If a decrease in cost of feeding cows shift supply by 40 million we will have new supply schedule =
New qs = Qs + 40
63+40 = 103
71+40= 111
79+40 = 119
87+40= 127
95 + 40 = 135
103 + 40 = 143
111+40 = 151
119 + 40 = 159
127 + 40 = 167
135 + 40 = 175
143 + 40 = 183
Answer:
In general, the <u>higher</u> the risk of a firm as perceived by its existing and potential investors, the greater is the firm’s weighted average cost of capital (WACC).
- If a firm is considered to be risky, they will get debt at a high rate to compensate for the risk making WACC greater.
The calculation of a firm’s weighted average cost of capital should be based on the <u>after-tax</u> cost of the dollar of financial capital raised.
- Interest is tax deductible so WACC is calculated net of taxes to cater for this.
It is generally believed that the proportions, or weights, used in the calculation of a firm’s weighted average cost of capital should be based on the market values of the firm’s capital sources. This is because the market value weighting system is more consistent with maximizing the value of the firm’s <u>Shareholder wealth.</u>
- Market Values are the true reflection of shareholder wealth and this is what the company should aim to maximise.
Although the use of market value weights is theoretically superior to the use of book value weights in the calculation of a firm’s weighted average cost of capital (WACC), firms often use book value weights due to their relative stability compared to the daily changes in market values. <u>True</u>
- Market values tend to fluctuate quite often so it is easier for companies to use book value amounts.
A firm’s new investments, existing assets, and capital structure affect its overall degree of risk and, in turn, its weighted average cost of capital. <u>True</u>
- The assets and potential assets that a company has as well as how it funded those assets determine just how risky the company is and as earlier mentioned, the riskier the firm, the higher the WACC so risk does have an effect on WACC.
