A company without debt has a WACC of 8%. The firm decides to go into debt at a rate of 5% to the tune of 33.3% (one third) of its value in order to finance a capital reduction of a similar amount. What is the cost of equity now? If the market risk premium is 4% and the β of the shares was 1.2, what is the new β of the shares after capital reduction?

Assume that the following conditions exist: a. all banks are fully loaned up- there are no excess reserves, and desired excess reserves are always zero. b. the money multiplier is 5 .     c. the planned investment schedule is such that at a 4 percent rate of interest, investment =$1450 billion. at 5 percent, investment is $1420 billion. d. the investment multiplier is 3 . e.. the initial equilibrium level of real gdp is $12 trillion. f. the equilibrium rate of interest is 4 percent now the fed engages in contractionary monetary policy. it sells $1 billion worth of bonds, which reduces the money supply, which in turn raises the market rate of interest by 1 percentage point. calculate the decrease in money supply after fed's sale of bonds: $nothing billion.

Why entrepreneurs start businesses. a) monopolistic competition b) perfect competition c) sole proprietorship d) profit motive

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