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Problem:
(a) Companies A and B differ only in their capital structure. A is financed by 30 percent debt and 70 percent equity; B is financed 10 percent debt and 90 percent equity. The debt of both companies is risk-free.
(i) Rosencrantz owns 1 percent of the common stock of A. What other investment package would produce identical cash flows for Rosencrantz?
(ii) Guildenstern owns 2 percent of the common stock of B. What other investment package would produce identical cash flows for Guildenstern?
(iii) Show that neither Rosencrantz nor Guildenstern would invest in the common stock of B if the total value of company A were less than that of B.
(b) "Modigliani and Miller totally ignore the fact that as you borrow more, you have to pay higher rates of interest." Explain carefully whether this is a valid objection.
In your own words, describe the meaning of average cost. You normally buy a crate of wine for $75. One crate has 6 bottles of wine. After a month, the store clerk informs you that
Please turn in the linear program for the following problem. No need to solve the LP. Exercise 3 (Multi-Period Fixed Income Capital Budgeting) As part of the settlement for a class
Does the structure of the population issue? Dependents into an economy, children as well as old people are assists by the economically active. Dependency ratio uses to measure
Discuss about the free market economy in short. Free market economy: Households own resources and markets assign resources throughout the price mechanism. An increase wi
Explain about the term underemployment and unemployment rate. Discouraged employees are non-working people who are able of working although are not actively in search of a job.
Procedure for export under deferred paymet
1. The student is required to research a business topic, drawing information from a number of sources, prepare and give a talk to a group, and answer questions. Simply presenting
QUESTION (a) Explain the real business cycle theory. (b) Using appropriate diagrams differentiate between inflationary and deflationary gaps. (c) Differentiate between th
what factors affect the volume of production in an economy
product asssignment on factor of production
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