Answer:
Task a:
The answer is $24,500.
Task b:
The answer is 17%
Explanation:
<h2>Task a:</h2><h3>What is the maximum amount of new capital that can be raised at the LOWEST component cost of EQUITY?</h3><h3>Solution:</h3>
We already know the following:
Projected net income = $21,000
Payout ratio = 30%
Retention ratio = 70%
Debt share = 40%
Equity share = 60%
Maximum amount of capital to be raised at the lowest component cost of equity = Projected net income ×
= $21,000 × 
= $24,500
<h3>Answer:</h3>
The maximum amount of new capital that can be raised at the lowest component of equity is $24,500.
<h2>Task b:</h2><h3>What is the component cost of equity by selling new common stock?</h3><h3>Solution:</h3>
k(e) (component cost of external equity) = [Dividend (D0)(1 + growth) / stock price(1 - flotation cost)] + growth
Formula:
k(e) = 
+ 0.05
Where
Do = $2.00
G = 0.05
P = $21/88
= ($2.00(1 + 0.05) / $21.88(1-.20)) + 0.05
= ($2.10/$21.88(1-.20)) + 0.05
= ($2.10/$21.88(0.80) + 0.05
= 0.17 or 17%
<h3>Answer: </h3>
The component cost of equity by selling new common stock = 17%
Answer:
D) Susie would buy more massages and fewer rounds of golf,as predicted by the substitution effect.
Explanation:
Let's check the utility that Susie gets from consuming these products.
The second round of golf gives her 20 units of satisfaction at $20 = 20/20 = 1
The third massage gives her 30 units of satisfaction at $30 = 30/30 = 1
But now the price the price for massage has come down to $15. The ratio of their prices would be
20/15 = 1.333
1.3 is greater than 1
So she should substitute golf for massages
Answer: increased, trade- offs, marginal thinking, small.
Explanation:
According to the passage, The coach is weighing a slightly<u> increased </u>risk of losing against a slightly decreased risk of injury to the star quarterback. This weighing o<u>f trade-offs </u>is an example of <u>marginal thinking,</u> because the star quarterback was in for most of the game, and the coach's decision concerns <u>small </u>shifts in probabilities with the game nearly over.
Answer:
d. Choose Option B because it has a higher NPV
Explanation:
The computation is shown below:
For Option A:
Investment = $10 million
Present Value of cash flows = Cash flow ÷ Discounting rate
= $2 ÷ 10%
= $20 million
Now
NPV = $20 - $10
= $10 million
We know that
IRR is the rate at which the NPV will be zero
So, 2 ÷ r - 10 = 0
r = 20%
For Option B:
Investment = $50 million
Present Value of cash flows = $6.5 ÷ 10% = $65 million
NPV = $65 - $50 = $15 million
we know that
IRR is the rate at which the NPV will be zero
So, 6.5÷ r -50 = 0
r = 13%
Based on NPV, Option B should be selected as it contains higher NPV as compared to option A.
However, Based on IRR, Option A should be chosen as it contains higher IRR and a higher IRR represent a higher profit percentage
Answer:
I do not agree that "the needs of a society conflict with the goals of the financial services industry's desire to make a profit", but on the contrary, I consider that the economic objectives of the financial system contribute to the well-being of the individuals that make up society, with which they satisfy the needs of this in an indirect way.
I believe this because the financial system, through its will to profit, creates jobs and economic opportunities for individuals, who would otherwise be forced to meet their needs without the help of a system designed to profit as a result of work done (such as communism).
