Bank Muscat is using two forms of financing - Debt and Equity. The Cost of Debt is 3.05% and Cost of Equity is 19%. The weight of Debt is 45%. Calculate Weighted Average Cost of Capital (WACC). Select one: O a. None of the options O b. 12.50% O c. 11.50% O d. 11.82% O e. 12.20% Clear my choice
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- 6) Some people have said that the Soviet Union saved too much. Explain the benefit of saving in the long run and how over-saving could be possible. 7) Give an example of a government policy that could change savings behavior and an example that could change the productivity in an economy. 8) Explain why the Federal Reserve’s goals of lowering inflation and unemployment creates a time consistency problem. Explain using the short and medium run Phillip’s curve. 9) Show a liquidity trap situation on an IS-LM graph. Explain the possible policy changes to end this situation. ************* SHOW WITH GRAPHS PLEASE*********************Explain in some detail how the PrecisionTree calculations in Figure 6.11 for the Acme problem are exactly the same as those for the hand-drawn decision tree in Figure 6.6. In other words, explain exactly how PrecisionTree gets the monetary values in the colored cells in Figure 6.11. If your answer is negative number, enter "minus" sign. Market EMV Great ( $18 × - $ ) = $ Fair ( $18 × - $ ) = $ Awful ( $18 × - $ ) = $ Total 0.45 × __ $ + 0.35 × ___$ + 0.20 × ___ $ = ___ $Rollo Megabux has $1 million to invest in stocks orbonds. The percentage yield on each investment during thecoming year depends on whether the economy has a goodor a bad year (see Table 17). It is equally likely that theeconomy will have a good or a bad year.a If Rollo is risk-neutral, how should he invest hismoney?b For $10,000, Rollo can hire a consulting firm toforecast the state of the economy. The consulting firm’sforecasts have the following properties:P(good forecast|economy good) .80P(good forecast|economy bad) .20Should Rollo hire the consulting firm? What are EVSIand EVPI? Economy EconomyHas Good Has BadYear YearYield on stocks 22% 10%Yield on bonds 16% 14%
- Fred has been told that diversifying his investments will significantly reduce risk. He hastherefore invested in two stocks. His portfolio consists of a $1 500 000 investment in DrugsLimited and $750 000 invested in shares of Pharmaceuticals Limited.Economy Probability ReturnsDrugs Limited PharmaceuticalsLimitedBoom 0.4 12% 19%Normal 0.5 8% 11%Recession 0.1 2% -4% i. What is the expected return on Fred’s portfolio? ii. Advise Huron as to the effectiveness of his diversification strategy.What is the relative tax advantage of corporate debt if the corporate tax rate is Tc=0.21 , the personal tax rate on interest is TpD=0.37 , but all equity income is received as capital gains and escapes tax entirely ( TpE=0 )? How does the relative tax advantage change if the company decides to pay out all equity income as cash dividends that are taxed at 20%? Note: Do not round intermediate calculations. Round your answers to 4 decimal places.EBIT of different Firms are as follows, Interest (I) at 10% and Equity Capitalization Rate (Ke) below, calculate the Total Market Value of each firm and interpret. Explain the relevance of EBIT-EPS analysis, Indifference point and Financial Breakeven Point to firms. Firms EBIT I Ke (%) A 400000 40000 12% B 600000 120000 16% C 1000000 400000 15% D 1200000 480000 18%
- In the Keynesian cross model, assume that the consumption function is given by:C = 100 + 0.7(Y – T)Planned investment is 300, government purchases and taxes are both 500 (initially a balanced budget)Carry all calculations to two decimal places.a. Graph “planned expenditure” as a function of income.b. What is equilibrium income?c. If government purchases increase to 550, what is the new equilibrium income? What is the income multiplier for government purchases?d. Based on your answer to the income multiplier in part c, what change in the level of government purchases is needed to achieve a new, higher level of income of 2200 (taxes unchanged at 500).e. Based on the tax multiplier from question 2, what change in the level of taxes is needed to achieve a new, higher level of income of 2200? (government purchases remain at 500)Below is a list of domestic output and national income figures for a certain year. All figures are in billions. The questions that follow ask you to determine the major national income measures by both the expenditures and the income approaches. The results you obtain with the different methods should be the same. Personal consumption expenditures $245Net Foreign Factor Income 4Transfer Payments 12Rents 14Consumption of fixed capital(depreciation) 27Statistical Discrepancy 8Social Security Contributions 20Interest 13Proprietors Income 33Net exports 11Dividends 16Compensation of employees 223Taxes on production and imports 18Undistributed corporate profits 21Personal taxes 26Corporate income taxes 19Corporate profits 56Government purchases 72Net private domestic investment 33Personal Saving 20 1. Using the above data, determine GDP by both the expenditures and income approaches. A.) expenditures approach GDP B.)income approach GDP. 2. Determine NDP. 3. Now determine NI in two…Please answer along with the excel formulas - 1. Sue now has $125. How much would she have after 8 years if she leaves it invested at 8.5% with annual compounding? $205.83 $216.67 $228.07 $240.08 $252.08 2. Suppose you have $1,500 and plan to purchase a 5-year certificate of deposit (CD) that pays 3.5% interest, compounded annually. How much will you have when the CD matures? $1,781.53 $1,870.61 $1,964.14 $2,062.34 $2,165.46 3. Last year Rocco Corporation's sales were $225 million. If sales grow at 6% per year, how large (in millions) will they be 5 years later? $271.74 $286.05 $301.10 $316.16 $331.96
- You are the owner of Caché, a chain of women's clothing boutiques. Your state has a sales tax of 7%, and your city has an additional sales tax of 1.5%. Each quarter you are responsible for making these tax deposits to the city and state. Last quarter your stores had total revenue, including sales tax, of $488,250. a) How much of this revenue was sales (in $) and how much was sales tax (in $)? sales sales tax b) How much sales tax (in $) should be sent to the city? c)How much sales tax (in $) should be sent to the state?You currently own 600 shares of JKL, Inc. JKL is an all-equity firm that has 75,000 shares of stock outstanding at a market price of $40 a share. The company’s earnings before interest and taxes are $140,000. JKL has decided to issue $1 million of debt at 8 percent interest. This debt will be used to repurchase shares of stock. If the cost of equity is 25%, the WACC is 16% and cost of debt is 10%, what will be the implied D/E ratio?Mr. Dhaniram Singh was worried; to reduce his worry he thought he should write down his difficulties on paper and then start thinking what he could do about these problems. Primarily his listing included the following:- i. His largest competitor has reduced the prices by 10%.ii. He is short on raw material. iii. His liquidity position is not very sound due to slow receivables. iv. Bankers do not give him any more credits since they feel he should be able to manage within his existing credit limit and that is sufficient for his present turnover. He was thinking that this position has recently come up and is unable to find reason. His assistant Mr. Nehra feels all this has been happening because he does not have any information useful to arrive at actions. Another problem he raised is that there is no planning and he is taking too many days to take decisions. Answer the following questions:- a) If Mr. Singh starts planning, will it be sufficient to solve all his above…