Answer:
Letter a is correct. Distort incentives and this distortion causes markets to allocate resources inefficiently.
Explanation:
What happens is that when rates rise, it causes an imbalance in supply and demand, because at higher rates companies are forced to raise prices to offset tax costs, so the pass-through of consumer prices discourages consumption and as a consequence of less consumption, production also decreases, causing the inefficient allocation of market resources.
Answer:
3.60
Explanation:
Given that,
Sales units = 1,000
Sales price per unit = $60
Variable expenses = 40% of the selling price
Total Fixed cost = $26,000
Contribution margin per unit:
= Selling price - Variable cost
= $60 - ($60 × 40%)
= $60 - $24
= $36
Total contribution:
= Contribution margin per unit × Sales units
= $36 × 1,000
= $36,000
Profit = Total contribution - Fixed cost
= $36,000 - $26,000
= $10,000
Degree of operating leverage:
= (Sales - Variable costs) ÷ (Sales - Variable costs - Fixed Expenses)
= (60,000 - 24,000) ÷ (60,000 - 24,000 - 26,000)
= 36,000 ÷ 10,000
= 3.60
Answer: Option (B) is correct.
Explanation:
The three limitations to balance sheets are as follow:
1.) Assets are being noted or stored at a historical cost,
2.) There is a thorough use of the estimates,
3.) There's also omission of several precious non-monetary assets.
Therefore from the given options, we can state that the key limitation of using a balance sheets under the constraints of financial analysis is that different items in a balance sheet are or may be evaluated differently.
Answer:
Option (B) 5.5%
Explanation:
Data provided in the question :
Factor Risk premium
Factor 1 5%
Factor 2 3%
Beta of stock A on factor 1 = 1.4
Beta of stock A on factor 2 = 0.5
Expected return = 14%
Now,
Expected return
= Risk free rate + (Beta of factor 1 × Risk premium of factor 1) + (Beta of factor 2 × Risk premium of factor 2)
or
14% = Risk free rate + (1.4 × 5%) + (0.5 × 3%)
or
14% = Risk free rate + ( 7% + 1.5% )
or
Risk free rate = 5.5%
Hence,
Option (B) 5.5%
