Cost of equity capital is closest to: 16 percent
Solution:
WACC is covered on page 120 Corporate Finance, under Capital Structure.
Using the standard equation for WACC = %wt Equity x cost of equity (re) + %wt Debt x cost of debt (rd).
Since there is a 20% tax rate for the firm, the cost of borrowing is reduced by that amount. So the cost of debt is 4%, not 5%.
Plug the formula: 10% = 50% x re + 50% x 4%
The formula ( i.e. 0.1+(0.1-0.05)(1)(1-0.2)) in CFAI reading is questionable.
The calculation is 0.1+(0.1-0.05*(1-0.2))*(1)=16%
Answer:
return in dollars: 2.38
rate of retrun: 6.35%
Explanation:
<u>there are two returns:</u>
<em>one is the dividends</em> cash flow of $ 0.6
and the other is the <em>capital gain:</em>
current market price - cost: 39.28 - 37.5 = $ 1.78
total return in dollars: $ 2.38
2.38/37.50 = 0,06346667 = 6.35%
Development is the process of an economy’s increasing industrialization, standard of living, and economic wealth.
When there is a development in economics, they focus on improving the fiscal economic and social conditions in developing countries. Development does not happen over night or at a fast pace but eventually the areas they want to have developed become more economically sound to keep up with the economy's needs. There are 4 stages of economic development, they are expansion, peak, contraction and trough.
Answer: Boldovia will experience greater vacation in real GDP than Molfovia.
Explanation:
Boldovia will experience higher vacation in real gross domestic product (GDP) than Moldovia because Boldovia does not have automatic stabilizers while Moldovia has automatic stabilizers.
In Moldovia the effects of slump will be reduced by the unemployment insurance benefits, this will support residents incomes, and the effects of booms will be reduced because the tax revenues will rise. In Boldovia, incomes will not be supported during the period of slumps because of no unemployment insurance.
