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Describe an example of a real-world industry or market that would be considered by economists to be a natural monopoly.
a. What characteristics of the industry make it a monopoly?
b. What is the impact of the monopoly power on its customers?
c. Why might government want to regulate natural monopolies?
d. How might such regulation be structured?
For a certain period a bond amortization schedule shows that the amount for amortization of premium is $5 and that the required interest is 75% of the coupon. Find the amount of the coupon.
Due to the integrated nature of their capital markets, investors from the U.S. and the UK require the same real interest rate, 2.5% for their loans. There is consensus in the capital markets that the inflation rate will probably annual of 1.5% in the..
A firms dividends have grown over the last several years. 10 years ago the firm paid a dividend of $2. Yesterday it paid a dividend of $4. What was the average annual growth rate of dividends for this firm?
The Ogi Corporation, a construction company, purchased a used pickup truck for $22,000 and used MACRS depreciation in the income tax return. During the time the company had the truck, they estimated that it saved $8,000 a year. At the end of 4 years,..
A firm has a debt- equity ratio of 1.0. The required return on the firm’s assets is 16.1% and the pretax cost of debt is 9.1%. Ignore taxes. What is the firm's cost of equity?
GBK, Inc. has sales of 10,552; total assets of 6210; and a debt-equity ratio of 1.40. If its return on equity is 15%, what is its net income? What is the sustainable growth rate for Your Firm, Inc.?
DDD uses constant 12% WACC as discount rate while evaluating all its domestic projects. What do you foresee happening with its WACC in the next five years?
Storico Co. just paid a dividend of $1.90 per share. The company will increase its dividend by 20 percent next year and will then reduce its dividend growth rate by 5 percentage points per year until it reaches the industry average of 5 percent divid..
Stephen plans to purchase a car 5 years from now. The car will cost $55,339 at that time. Assume that Stephen can earn 5.16 percent (compounded monthly) on his money. How much should he set aside today for the purchase?
You used Dell as a representative company to estimate the cost of capital for GCI. What are some of the potential problems with this approach in this situation? What improvements might you suggest?
Write a short essay of 350-400 words for each of the following questions. Where possible, illustrate with an appropriate example in your answer. You must support your discussion with appropriate references.
You are considering two loans. The terms of the two loans are equivalent with the exception of the interest rates. Loan A offers a rate of 7.75 percent, compounded daily. Loan B offers a rate of 8 percent, compounded semi-annually. Which loan should ..
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