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Answer:
Excluded when calculating GDP because they do not reflect current production.
Explanation:
Transfer payments such as medicare, social security, medicaid, unemployment benefits, and other welfare programs are not calculated in GDP because they do not represent government purchases of goods and services, or in other words, they do not reflect goods and services currently produced and purchased.
They are instead, resources that the government takes either in the form of taxes, debt, or money supply, and allocates, or transfers, to specific recipients.
Answer:
$51,608.69
Explanation:
Given that
Interest rate = 5%
Future value = $85,000
Time period = 10 years
So by considering the above information, the Present value is
= Future value ÷ (1 + interest rate)^time period
where,
Future value = $85,000
Interest rate = 5% ÷ 12 months = 0.4166%
Time period = 10 years × 12 months = 120 months
Now the present value is
= $85,000 ÷ (1 + 0.4166%)^120
= $51,608.69
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Answer:
Raising the Funds through Retained Earnings
WACC = Ke(E/V) + Kp(P/V) + Kd(D/v)(1-T)
WACC = 14.7(0.36) + 12.2(0.06) + 11.1(0.58)(1-0.40)
WACC = 5.292 + 0.732 + 3.8628
WACC = 9.89%
Raising New Equity
WACC = Ke(E/V) + Kp(P/V) + Kd(D/v)(1-T)
WACC = 16.8(0.36) + 12.2(0.06) + 11.1(0.58)(1-0.40)
WACC = 6.048 + 0.732 + 3.8628
WACC = 10.64%
Difference in WACC = 10.64% - 9.89%
= 0.75%
Explanation:
WACC equals cost of equity multiplied by proportion of equity in the capital structure plus cost of preferred stock multiplied by proportion of preferred stock in the capital structure plus after-tax cost of debt multiplied by proportion of debt in the capital structure.
In this case, there is need to calculate WACC if funds were raised through retained earnings and WACC if funds were raised through new common stock. Then, we will determine the difference in WACC.
