The real money demand is equal to $2,60,000
Money demand/ P = 1000+0.2Y -1000i
Money demand/200= 1000+0.2(2000)-1000(0.1)= 1000+400-100
=1300
Money demand /200 = 1300
Money demand = $1300*200
= $2,60,000
Money demand is the demand for real cash balances as people hold onto money to purchase goods and services. The higher the price level, the more money you need to buy a certain amount of goods.
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Answer:
The correct answer to the following question is option E) 9.06% .
Explanation:
Here the cost of equity given is - 11.8%
Pre tax cost of debt- 6.9%
Tax rate- 35%
So the after tax cost of debt - 6.9% x 65%
= 4.485%
The debt to equity ratio - .6
So the weight of debt - .6 / ( 1 + .06 )
= .375
Weight of equity - 1 / ( 1 + .06 )
= .625
Weighted average cost of capital =
Debts cost x weight of debt + Equity cost x weight of equity
= 4.485 x .375 + 11.8 x .625
= 1.681875 + 7.735
= 9.06%
Answer: decrease tax revenue
Explanation:
A trade deficit occurs when the import of a country's is more than the export of the country for a given period of time period. The main cause is when there's an imbalance between the savings of a country and the investment rates.
In this case, financing the deficit will lead to the reduction in the tax revenue. When part of the tax revenue gotten from economic agents are used in the finance of the deficit, there'll be a reduction in the tax revenue.
Answer:
a)
P₀ = Div₁ / (Re - g)
- P₀ = current stock price = ?
- Div₁ = next dividend = $8
- Re = equity cost = 10%
- g = constant growth rate = 5%
P₀ = $8 / (10% - 5%) = $8 / 5% = $160
b)
EPS = $12
Return on equity (ROE) = g / b
b = retention rate = 1 - payout ratio = 1 - ($8/$12) = 0.333
g = 5%
ROE = 5% / 0.333 = 15%
c)
Present value of growth opportunity (PVGO) = P₀ - EPS/Re
- P₀ = $160
- EPS = $12
- Re = 10%
PVGO = $160 - $12/10% = $160 - $120 = $40 per share
Answer:
We will not hire a security guard.
Explanation:
Data provided
Merchandise stolen cost of every hour = $25
Hourly market wage for a security guard = $33
According to the given situation, The hourly loss is $25, and the hourly cost is $33, even if the shopkeeper keeps a security guard, then the cost per hour is $33, so the store loss increases by $33 - $25 = $8, so we will not hire the security guard to maximize the profit.
