The approach suggest that a firm's cost of retained earnings can be estimated by adding a risk premium of 3% to 5% points to the before-tax interest rate on the firm's own long-term debt.
The bond-yield-plus-risk-premium approach does assumes that cost of equity is closely related to the firm's cost of debt.
- The premium approach does help to determine the value of an assetof a company's such as its traded equity.
However, the approach suggest that a firm's cost of retained earnings can be estimated by adding a risk premium of 3% to 5% points to the before-tax interest rate on the firm's own long-term debt.
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Answer: Option A
Explanation: In simple words, a virtual organisation refers to a group of separate individuals or entities working for a common goal by coordinating their activities via any medium like E- mail or cell phones etc.
In the given case, all the four individuals are working for cutting clients cost and are operating through electronic mediums.
Hence from the above we can conclude that the correct option is A.
Explanation:
It is given that in the market there are four equal-sized firms that produce similar products. The market is saturated such that 10% industry-wide price rise would lead to 18% decline in units sold by all firms in the industry. Going further, there is a proposed legislation that imposes a tariff on a key input used by the industry, which on realization would result in the increase in marginal cost by $2.
This means that the market elasticity of demand is:
[ FIND THE ATTACHMENT FOR SOLUTION]
Answer and Explanation:
a. The crabs are a Common Good. They means can run out of supply if their use gets too much by society. Therefore, the decline of the Alaska king crab fishery can be explained by stating that the plenty types of boats such as those from California and Japan, has caused people to overfish, excessive fishing has brought about a decline in the supply of crabs.
b. There are 2 ways to avoid this
1. fishing permits have to be sold to the fishermen coming to fish for the crabs. Then the persons with the highest willingness to pay will come and buy the permits to fish.
2. Issuing just a particular amount of permits this would cause the fishermen to trade these permits. These open-market strategies have proved to be effective in organizing economic activity and are good stimulators in an economy.
c. They have been successful because regulations have been placed on fishing by the government. Also, if there are restrictions on other countries using up their spots and Canadians are the only ones fishing salmon, then there will be reduction in the decay rate of the population of the salmon, the salmon can easily repopulate, then Canadians would be able to come back the next year to fish again..
