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1 year ago

Which of the following statements highlights the difference between the CPI (consumer price index) and the GDP deflator?

Business

1 answer:

Lerok [7]1 year ago

6 0

Answer:

(c)-The CPI measures the average prices of goods and services consumed by typical consumers, whereas the GDP deflator measures the average prices of all goods and services in the economy.

Explanation:

The CPI measures the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care. It is calculated by taking price changes for each item in the predetermined basket of goods and averaging them.

Ad the GDP deflator is a measure of the level of prices of all new, domestically produced, final goods and services in an economy in a year.

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Which financing option has the highest overall costs?

katrin2010 [14]

Equity financing has the highest overall cost.

Further Explanation:

The financing options that are available to the company are equity and debt. Equity Financing refers to the issue of equity shares to the public. Debt refers to the loan taken by the company from the public or any financial institutions. The equity shareholders have the right to vote in general meetings while the debt holder does not have any such rights.

The equity shareholders are also entitled to receive dividends while debt holders are entitled to receive the interest regardless of whether the company is having a profit or not. The interest paid to debt-holders is deducted from the net profit before any tax is charged. The interest reduces the taxable income while the dividend is calculated on net profit after tax. Thus, the cost of using debt finance is lower as the amount which is paid as the interest is charged against the tax.

Therefore, Equity financing involves a higher cost than Debt financing.

Learn more:

1. Learn more about raising the equity

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2. Learn more about the problem related to equity theory

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3. Learn more about the short-term financial goals

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Answer details:

Grade: Senior School

Subject: Financial Management

Chapter: Cost of Capital

Keywords: Equity financing, the highest overall cost, debt financing, financing options, capital, business, shareholder’s fund, loan, financial management, raise, issue.

4 0

2 years ago

Read 2 more answers

An investor has purchased stock in a firm. The investor believes that, at the end of the year, there is 0.20 probability that th

disa [49]

Answer:

loss of $200

Explanation:

As given, there are three cases can happen:

1) 0.20 probability that the stock will show a $3000 profit

=> 0.20 probability that profit = $3,000

2) 0.10 probability that the stock will show a $6000 profit

=> 0.10 probability that profit = $6,000

3) 0.70 probability that the stock will show a $2000 loss

=> 0.70 probability that profit = - $2,000

The expected profit in the stock at the end of the year can be calculated as following:

Expected profit = Probability case 1 x Profit case 1 + Probability case 2 x Profit case 2 + Probability case 3 x Profit case 3

=0.2 x 3,000 + 0.1 x 6,000 + 0.7 x (-2,000)

=. 600 + 600 -1,400 = -200

So that, the expected profit in the stock is the loss of $200

5 0

2 years ago

What is the maximum amount you would pay for an asset that generates an income of $ 250,000 at the end of each of five years if

Galina-37 [17]

Answer:

170,146

Explanation:

$250,000 / (1.08)5= 170,146

3 0

1 year ago

You are a CPA. You have just finished one of your client’s taxes and found that he owes $10,000 more in taxes than he expected.

solmaris [256]

Answer:

(2) I. Express appreciation for trusting you to handle taxes II. Explain situation A. Unexpected income B. Change in tax codes III. Inform the client he owes an additional $10,000 in taxes IV. Close with a forward-looking statement.

Explanation:

This would be the best way to address this situation. In this example, the client is likely to be angry and upset when he realizes about the changes in his taxes. Therefore, you should try to preempt this situation. By expressing appreciation for using you to handle his taxes, you begin in a positive and friendly note. Moreover, you should proceed to explain the situation, inform him of the changes, and end on a kind note.

6 0

1 year ago

Which best describes the role of financial planning?

STatiana [176]

You invest and save

6 0

1 year ago