ECO 372 FINAL EXAM 1. Consider if the government instituted a 10% income tax surcharge. In terms of the AS/AD model this change should have a. shifted the AD curve to the left b. shifted the AD curve to the right c. made the AD curve flatter d. made AD curve steeper 2. If the depreciation of a country’s currency increases it aggregate expenditures by 20, the AD curve will a. shift right by more than 20 b. shift right by less than 20 c. shift right by exactly 20 d. not shift at all 3. Suppose that consumer spending is expected to decrease in the near future.
What is the after-tax cost of debt if the tax rate is 34%? (5 pts) c. Explain what other methods you could have used to find the cost of debt for AirJet Best Parts Inc.(10 pts) d. Explain why you should use the YTM and not the coupon rate as the required return for debt. (5 pts) 2. Compute the cost of common equity using the CAPM model. For beta, use the average beta of three selected competitors.
Note that the actual state rate is reduced by 25% to allow for the deductibility of state income taxes on the federal income tax return. Thus, she should choose the corporate bond. When the state rate is 10%, Dana would achieve the following returns from the Treasury bond or the corporate bond: The Treasury bond would still yield $1,125 or $30,000 x [.05 x (1-.25)] after tax because state rates don’t affect after- tax returns from Treasury bonds. The corporate bond yields $1,215 or $30,000 x [.06 x (1 - .25 - .10(1-.25))] after tax. Again, note that the actual state rate is reduced by 25% to allow for the deductibility of state income taxes on the federal income tax return.
Learning Team Ratio Analysis Paper Kudler Fine Foods Liquidity Ratio Upon reviewing the financial statements of Kudler Fine Foods, I came up with the following financial ratio for the company: The Kudler Fine Foods’ current total asset is $1,971,000 and the total current liabilities is $116,290. The company’s current ratio is 16.95. (1,971,000/116,290) = 16.949=16.5 Therefore, for every $1 that our company owes in short term, there is $16.95 in assets available that we can convert to cash in short term. Our company’s Debt Ratio is Total Debt is divided by our Total Assets. Our Total Current Liabilities are as follows: Accounts Payable 96,500 Sales Tax Payable 3,950 Payroll Tax Payable 15,840 and our Total Long Term Liabilities are the following: Long Term Notes Payable 630,000 Therefore, the Total Liabilities we have is $ $746,290 and our Total Assets is $2,675,250.
The author of this article, Jeannine Aversa, is stating that key economic indicators point to the likelihood of a recession. Aversa supports her thoughts by noting the real GDP; “crawled at a 1.3 percent pace in the opening quarter of 2007…even weaker than the sluggish 2.5 percent rate in the closing quarter of last year.” The author suggests the main cause of the economic slowdown is due to “the housing slump.” Consumer expenditures are driving the economy, but Aversa worries about a “fallout from risky mortgages and rising energy prices.” Uncertainty of the Feds actions concerning the interest rates is leading to lower investment spending. The author also states that the Feds decision on raising or lowering the interest is due to the
| | | | | * Question 4 2 out of 2 points | | | Using the data below, determine the amount of consumer surplus, if any, in the market. The market clearing price for matinee tickets is $3 | Matinee TicketsWilling to Pay(WTP) | Tony | $1 | George | $2 | Deshon | $3 | Mario | $4 | Antonio | $5 | Brittney | $6 | | | | | | Selected Answer: | $6 | | | | | * Question 5 2 out of 2 points | | | Examine the graph below. The government has placed a $200 tariff on product z. The new equilibrium price is $600. What has happened to consumer surplus?
Second, financially stressed companies that go dark are the very companies’ shareholders need to monitor usually and where transparency is most important. Clearly, SOX has both positive and negative effects. However, the implementation problems of the Act do not provide sufficient reason to weaken or eliminate SOX requirements or to adopt significant exemptions based on company size. 2. What advantages would China offer foreign companies to list on its exchanges?
A discount bond is a bond that is issued for less than its par (or face) value, or a bond currently trading for less than its par value in the secondary market and is backed by consumer paper. For example, say you buy the bond at a discounted 35% of 100 dollars, therefore, the bond costs you 65 dollars. Your margin of safety is 35%. Two things can happen. One, the bond performs and you make 35% more.
1. How would you define “Frozen Preferences” and what is the impact of this concept on strategy formulation, alternative analysis and recommendation? • Managers don’t like to make major strategic changes once decisions have been made (except in the case of overwhelming evidence) as they will look unprepared and ineffective and their creditability is damaged • Frozen preferences o Management has made a decision and over time analysis shows that their decision may not be the best choice o However they feel compelled to maintain their current strategy even if it is not the best course of action. • As management preferences becomes a larger part of the organization (personnel changes, budgets etc), it becomes more and more difficult to change direction. o A tendency to avoid reversing changes even if it was not the best choice o In reality, past expenditures are sunk costs and the organization should use a clean slate to look at new choices, but to the manager, this will come at great personal loss.
While the invisible hand cannot guarantee efficiency, it is better at guaranteeing equity. ANSWER: F TYPE: T KEY1: D SECTION: 2 OBJECTIVE: 7 RANDOM: Y [cxx]. The two broad reasons for a government to intervene in the economy are to promote efficiency and to promote equity. ANSWER: T TYPE: T KEY1: D SECTION: 2 OBJECTIVE: 7 RANDOM: Y [cxxi]. Market failure refers to a situation in which the market does not allocate resources efficiently.