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A. Consumers are illogical because they are buying more Starbucks beverages in 2019 despite the fact that Starbucks has raised prices 10 to 30 cents per drink.
11. Let's call the original demand curve (from Question 4) D1 and the new demand curve (from Questions 6-10) D2. Plot both of the demand curves on the graph above. Use the formulas for the two demand curves to compute the quantity demanded shown by each curve at a price of 34. 12. Demand Curve D1: Price: 34, Quantity: 13. Demand Curve D2: Price: 34, Quantity: 14. Describe what has happened to demand in this problem.
Using the following data($ billions) for a given year and assuming that GDP equals GNP,calculate (a) gross domestic product (b) national income (c) net national income (d) indirect business taxes.
1.consumption spending = $8000
2.interest income = 500
3.rental income = 200
4.investment spending = 2,500
5.profits = 2,000
6.wages salaries = $ 7000
7.depreciation =1550
8.government spending =2000
9.net export spending = -450
why is productivity important?
Essex Cosmetic Corp. has marginal tax rate of 40%. Table 2 gives the details of the balance sheet. The stock of Essex Cosmetic Corp. has a market-to-book ratio of 2. The firm’s bonds have a face value of £150 million and sell at a price of 120% of face value. The cost of equity is 12%, pretax cost of debt is 7%.
Essex Cosmetic Corp. (Book values, £ million)
Asset Value £330. Debt £ 150
Equity £ 180
£330 £ 330
a. Essex Cosmetic Corp wants to invest in machine with cash flows of £ 5 million per year pretax and it continues indefinitely. What is value of machine, given initial investment of £20 million. The machine cost of £20 million will be financed with £10 million in new debt initially. Compute the value of the machine using the APV method, assuming Essex Cosmetic Corp. will maintain a constant debt-equity ratio for this investment.
The King Food Corp. currently has no debt in its capital structure. The beta of its capital is 1.5. The King Food Corp’s free cash flow is expected to equal £30 million next year. This cash flow is expected to grow at 2% per year for the foreseeable future. King Food Corp. is considering changing its capital structure by issuing debt and using the proceeds to buy back stock. It will do so in such a way that it will have a 50% debt-to-equity ratio (D/E=50%) after the change, and it will maintain this debt-equity ratio forever. Assuming King Food Corp’s pretax cost of debt will be 5%. King Food Corp. faces a corporate tax rate 40%. Assuming that the CAPM holds, the risk-free rate is 3%, and the expected market index risk premium is 8%.
(a) Calculate the cost of equity before the change in capital structure and after change in the capital structure, respectively.
Stock SStock W
Expected Return 12%
Beta11.5
(a)Assume the CAPM holds, calculate the risk-free rate and expected market index risk premium.
(b)The stock of Prince Corp. has an expected rate of 25% and a beta of 2, what is likely to happen to the share price of Prince Corp.
c) Great Food Corp. is considering whether to invest in a new food manufacturing process that minimize carbon emission. The project will require an initial investment of £10 million. Suppose this project will produce the following free cash flows: 2m in year 1; 4m in year 2; 3m in year 3; and 4m in year 4. In year 4 you expect the growth rate of the free cash flow is 2% for the foreseeable future. The required rate of return on this project is 14% return for the first three years, and a 10% return thereafter. What is the NPV of this project?
You are a senior analyst at the Central Bank, MMA and have been assigned to come up with suggestions
on the way forward in Monetary & Fiscal Policy of Maldives. (Suggestions on Fiscal Policy will be advised
to the Government)
Write a comprehensive report on justifying your suggestions, which will be presented to the board of
directors of the MMA for approval.
Your report can include:
• Analysis of current situation
• Suggestions on Monetary Policy
• Suggestions on Fiscal Policy
• Reasoning and Justification of suggestions
• Other considerations regarding the economy
Suppose the South African government has just issued treasury bills worth R50 million through the South African bond exchange market. This scenario is concerned with
a.
indirect financing of a real transaction.
a. indirect financing of a real transaction.
b.
direct financing of a financial transaction.
b. direct financing of a financial transaction.
c.
indirect financing of a financial transaction.
c. indirect financing of a financial transaction.
d.
direct financing of a real transaction.
Which of the following would be classed as a monetary policy?
a.
A decrease or increase in the quantity of money.
a. A decrease or increase in the quantity of money.
b.
An increase in government spending.
b. An increase in government spending.
c.
An increase in the demand for loans.
c. An increase in the demand for loans.
d.
An increase or decrease in the interest rate.
#333702 on Dec 2022