Policies are imposed in an economy to promote economic growth which is increasing real GDP. Policies essentially either aim to increase in aggregate demand or aggregate supply. There are demand side policies and supply side policies. Demand side policies become important during recession or period of economic stagnation. Supply side policies are important for determining long run growth in productivity.
Week Two Individual Assignment FIN/419 July 30, 2012 Jeffrey Leeson Week Two Individual Assignment P5–3 Risk preferences Sharon Smith, the financial manager for Barnett Corporation, wishes to evaluate three prospective investments: X, Y, and Z. Currently, the firm earns 12% on its investments, which have a risk index of 6%. The expected return and expected risk of the investments are as follows: a. If Sharon were risk-indifferent, which investments would she select? Explain why.
Demand side policies are those that manipulate the level of aggregate demand (AD) to achieve one or more economic objective. The policies can be fiscal policies (changes in government spending and/or taxation), or they might be monetary policies (which are largely changes in the short-term rate of interest). The four major macroeconomic objectives are a sustainable level of economic growth; low inflation; low unemployment; and a medium term balance on current account. Recently the government have used loose fiscal policy and the MPC have reduced the rate of interest. These are designed to increase the level of AD and increase in national income.
Precedents usually yield higher valuations than trading comps because a buyer must pay shareholders more than the current trading price to acquire a company. This is referred to as the control premium (use 20 percent as a 31 Customized for: JJ (jchen59@wisc.edu) Vault Guide to Private Equity and Hedge Fund Interviews Finance benchmark). If the buyer believes it can achieve synergies with the merger, then the buyer may pay more. This is known as the synergy premium. Between LBOs and DCFs, the DCF should have a higher value because the required IRR (cost of equity) of an LBO should be higher than
Within this essay, I will be discussing the advantages of this happening as well as the disadvantages that may occur. Furthermore, to understand the question, we must first understand what economic growth is. It is an increase in the capacity of an economy to produce goods and services, compared from one period of time to another. Firstly, the propensity to consume will increase. This is because the proportion of income spent for the poorer is higher so the redistribution of income will increase consumption and therefore increase aggregate demand.
An increasing marginal cost curve will intersect a U-shaped average cost curve at its minimum, after which point the average cost curve begins to slope upward. This is indicative of diseconomies of scale. For further increases in production beyond this minimum, marginal cost is above average costs, so average costs are increasing as quantity increases. As for the short run average cost curve, initially it is worth producing more, as you are making use of the fixed resource(e.g., reezit machine). however, as the law of diminishing return sets in, it is more costly to produce the extra unit of output.In the short term, there is at least one fixed unit of input that cannot be changed, and because of that, the law of diminishing return applies, saying that as you add successive units of labour into a fixed input, the marginal return diminishes over time.
CCI would be taking a somewhat high risk by issuing additional stock due to the uncertainty about the offering price. Having a low P/E ratio with respect to the rest of the market, and the replacement cost of the firm being greater than its book value (argument 3), there is a good chance that the current stock price and the proposed offering Although long-term debt is a better financing choice a few of the drawbacks are pointed out. Debt holders claim profit before equity holders, so the chance that profits may be lower than expected, increases risk to equity may reduce or impede stock value. However, in extreme financial situations such as a recession period, CCI would still be able to increase its cash during a recession period with all debt capital structure. Also, there is a remaining 12.5 million that would have to be paid at the expiration of the bonds, but that could be paid off by issuing new bonds or additional equity at that time.
c. Internal common equity where the current market price of the common stock is $43.50. The expected dividend this coming year should be $3.25, increasing thereafter at a 7% annual growth rate. The corporation’s tax rate is 34%. d. A preferred stock paying a 10% dividend on a $125 par value. If a new issue is offered, flotation costs will be 12% of the current price of $150.
• Would need to reduce working capital by $260M • Would need to increase gross margins by 328bps • If growth is so important, then a price raise would likely slow that. The DPO change needed to self-finance is likely too aggressive. I would try to get half through DPO improvements and the other half through debt. This roughly doubles their debt. (But
There are two types of Fiscal policy put in place to alter the level of aggregate demand; Expansionary fiscal policy and Contractionary fiscal policy. When an economy is in a recession, expansionary fiscal policy is in order. Typically this type of fiscal policy results in increased government spending and/ or lower taxes. A recession results in a recessionary gap meaning that aggregate demand is at a level lower than it would be in a full employment situation. In order to close this gap, a government will typically increase their spending which will directly increase the aggregate demand curve (since government spending creates demand for goods and services).