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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.
Problem-solving question: Use the following data for a firm’s output at various levels of employment (L) to calculate: a) its marginal physical product of labor (MPPL) schedule; (
summary
the central problem facing a group of survivors on a ship
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How does macro-economic stabilisation assist growth? Economic agents as the consumers, private zone and overseas investors as like multi nationals make decisions based onto co
QUESTION a) Differentiate between returns to factor and returns to scale. b) In the long-run the Average Cost Curve is u-shaped. Discuss c) Whenever a firm is making loss
QUESTION (a) Use graphical methods to distinguish between cost push and demand pull inflation. (b) Explain how a budget deficit of the government can cause inflation. (c)
to explain in detail how to get five rights in procurement and supply
QUESTION 1 Critically examine alternative theories of money demand and specify a demand for money equation for Mauritius. QUESTION 2 Discuss the macroeconomic and micro
business environment
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