Answer:
14.925%
Explanation:
Cost of equity = Unlevered Cost of Equity + (Unlevered Cost of Equity - Cost of debt)*Debt to value ratio / (1-debt to value ratio)*(1-Tax rate)
Cost of equity = 12% + (12%-9%)*0.6/(1 - 0.6)*(1 - 35%)
Cost of equity = 0.12 + 0.018/0.4*0.65
Cost of equity = 0.12 + 0.02925
Cost of equity = 0.14925
Cost of equity = 14.925%
So, Alabaster's cost of equity will be 14.925%.
Answer:
Total Revenues would increase because Demand is Inelastic
Explanation:
Demand is buyers ability & willingness to buy at a given price, time.
Elasticity of Demand is quantity demanded responsiveness to price change.
More Elastic Demand means quantity demanded responds highly to change in price. Percentage Change in Quantity Demanded > Percentage Change in Price. Elasticity of Demand [Δ%Q / Δ%P] >1 in this case. Price and Total Revenue (PxQ) are inversely related in this case ; i.e - price rise, TR fall & price fall, TR rise.
Less Elastic Demand means quantity demanded responds less to change in price. Percentage Change in Quantity Demanded < Percentage Change in Price. Elasticity of Demand [Δ%Q / Δ%P] < 1 in this case. Price and Total Revenue (PxQ) are positively related in this case ; i.e - price rise, TR rise & price fall, TR fall.
So: If Sam's Pint price change by 20% leads to demand fall by 4%, the demand is less elastic i.e < 1. Hence, Total Revenue will increase with increase in price.
As she adjust to this event, SHE WILL CONSUME LESS PEANUT BUTTER AND MORE ICE CREAM.
Utility maximization is an economic concept, which consumers use when making purchases. Consumers usually try to get the greatest possible value from the least amount of money. Thus, the theory of utility is a theory of consumer behaviour, which explain how consumers allocate their incomes.
