Answer: 5.36%
Explanation:
The after-tax cost of debt refers to the interest that is paid on debt which is then less the income tax savings as a result of the deductible interest expenses.
When calculating the after-tax cost of debt, the effective tax rate of a company should be subtracted from 1, after which the difference will be multiplied by the cost of debt. This will therefore be:
= Rate (10,8% × 1000, -960 + 20, 1000) × (1-40%)
=5.36%
Contribution margin is calculated via subtracting the variable cost per unit to the sales price per unit. In equation, we have
Contribution margin = Sales Price - Variable Cost
Contribution margin ratio is calculated via dividing the contribution margin with the sales price. In equation, we have
Contribution margin ratio = contribution margin/sales price
Substituting the given values,
Contribution margin ratio for 65$ variable cost = (120-65)/120 = 0.4583
Contribution margin ratio for 58$ variable cost = (120-58)/120 = 0.5167
<em>ANSWERS: 0.4583 or 45.83% and 0.5167 or 51.67%</em>
Answer:
a. 10.60%
b. 3.53%
Explanation:
a. Calculate the yield on the repo if it has a 5-day maturity.
Profit = $34,000,000 − $33,950,000 = $50,000
Using 360 days a year, we have:
Yield on the repo = ($50,000/$33,950,000)*(360/5) = 0.1060, or 10.60%
b. Calculate the yield on the repo if it has a 15-day maturity.
Using 360 days a year also, we have:
Yield on the repo = ($50,000/$33,950,000)*(360/15) = 0.0353, or 3.53%
Pure competition or perfect competition is where all firms have full knowledge of what is going on in the market, where there is free flow of information between not only the producers, but also with the consumers.
As such, all firms have no dominant share of market power since each individual firm is able to produce the good of the same quality and quantity (factors of production are fluid, and no costs in transportation in this theory). And at the same time, consumers have full knowledge of the quality of good they are getting and hence no firm will be able to exploit the misinformation of a good for its own profits.
This builds up to the point of a perfectly elastic demand curve, where consumers know what amount and at which price point do they value the product at. And knowing for the fact that small individual firms in a purely competitive firm have no say over prices, they become the price takers for this kind of market. Thus where MB=MC, the equilibrium point is reached and it is also at the socially optimal level since all consumers have full knowledge of the pros and cons of consuming a product (hence no externalities).
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