<span>profit-and-loss statement</span>
The advantage of a free market economy is that when it works it can both be reward and perpetuate innovation But they are inherently more risky and does tend to favor those more capital and resources . In an Economic make system with multiple equilibria coordination failure occurs when a group of firms could achieve a more desirable equilibrium but fail to because they do not coordinate their decision making
I m pretty sure the product supply would grow then the price would drop
Answer: 9.7%
Explanation:
Given Data
Rf = Risk free return = 6%,
Rpm = Risk premium = 4%,
Beta = 0.9
Wd = Debt = 20%
rd = cost of debt = 8%
We = equity = 80%
Re = Rf + Beta (Rpm)
= 0.06 +0.9 (0.04)
= 0.096 * 100
= 9.6%
Unlevered Equity Cost ;
ReU= Wd × rd + We × re
= 0.20 × 8% + 0.80 × 9.6%
= 9.28%
Levered Equity Cost:
New Debt = 60%,
New Equity = 40%,
New rd = 9%
ReL = ReU + (ReU - rd) (D ÷ E)
= 9.28% + (9.28% - 9%) (0.60 ÷ 0.40)
= 0.097 * 100
= 9.7%
