Answer: b.Produce fewer meals and increase their profit
Explanation:
The profit maximising point for production is generally said to be the point where Marginal Revenue equals Marginal Cost. At this point, the company producing is maximising its resources and wasting nothing whilst getting the highest amount of profit they can.
If they produce at a point higher than this point then Marginal Cost will be be higher than Marginal Revenue which is not profitable. This is the situation with Food Fanatics. They are producing at a point higher than the profit maximising level because their Marginal Revenue of $20 is lower than their marginal cost of $25.
The remedy to this is to produce fewer meals to the point where Marginal Revenue equals Marginal Cost, thereby increasing their profit.
Answer:
Ke = D1/Po(1-F) + g
Ke = $0.65/17(1-0.1) + 0.06
Ke = 0.0425 + 0.06
ke = 0.1025 = 10.25%
WACC = Ke(E/V) + Kd(D/V)(1-T)
WACC = 10.25(55/100) + 7.75(45/100)(1-0.4)
WACC = 5.6375 + 2.0925
WACC = 7.73%
Explanation:
In this case, there is need to calculate cost of equity in the light of floatation cost using the above formula. Thus, we will now calculate WACC by considering cost of equity and the proportion of equity in the capital structure plus after-tax cost of debt and the proportion of debt in the capital structure.
Tomatoes are an input in the production of ketchup, and ketchup and mustard are substitutes. An increase in the price of tomatoes will LOWER the total surplus in the market for mustard
