Answer:
1.103%
Explanation:
Data provided in the question:
Market debt-equity ratio = 0.65
Corporate tax rate = 40%
Interest on paid its debt = 7%
Now,
Debt ÷ Equity = 0.65
or
Debt = 0.65 × Equity
Weight of Debt = Debt ÷ (Debt + Equity)
or
= ( 0.65 × Equity ) ÷ ( 0.65 × Equity + Equity )
= 0.65 ÷ 1.65
= 0.3939
also,
Tax shield = Corporate tax rate × Interest paid on its debt
= 0.40 × 0.07
= 0.028
= 2.8%
Therefore,
The interest tax shield from its debt lowers Summit's WACC by
= Weight of Debt × Tax shield
= 0.3939 × 2.8%
= 1.103%
The interest tax shield from Summit Builders' debt, given a debt-equity ratio of 0.65, the interest rate of 7%, and the tax rate of 40%, lowers its WACC by 1.82%.
The Interest Tax Shield from debt is the reduction in tax expense achieved by offsetting interest expenses on debt against taxable income. The formula for calculating interest tax shield is Interest Paid * Tax Rate.
In the context of this question, the interest paid can be calculated as the product of the debt-equity ratio and the interest rate on the debt. Using the provided information, the calculation would be as follows:
So, the interest tax shield from Summit's debt lowers its Weighted Average Cost of Capital (WACC) by 1.82%.
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Answer:
Elastic demand
Explanation:
Elastic demand states when there is a change in the price of a product the quantity demanded changes. An increase in price may lead to a decrease in demand whereas, a decrease in price may lead to an increase in quantity demanded.
In this case we see when the B2B supplier increase its price, the orders dropped by 25%. Which proves that it is an elastic demand.
If an increase in price leads to no changes or increase in quantity demanded then it is called inelastic demand. Example: disease curing drugs.
In measuring return-on-investment (ROI) from sport sponsorships, companies have used all of the following methods except C. Q Scores scale.
Explanation:
Return on Investment (ROI) helps in determining whether the investment results in gain or loss. The gain or loss of amount is obtained based on the amount of money invested. ROI is used to compare the gain between the companies. ROI can help in deciding the personal financial transaction. Return on Investment is expressed in percentage.
Q score provides the information regarding the popularity of the brand, company, celebrity and entertainment product. Q score becomes high if the familiarity of the brand or company is high among people.
Companies measure the ROI from sport sponsorships using various methods, except periodic consumer surveys.
In measuring return-on-investment (ROI) from sport sponsorships, companies have used various methods, including periodic consumer surveys, professional research companies such as Sponsorship Research International (SRi), sales/promotion bounceback measures, and the QScores scale.
However, the method not mentioned in the question is A. periodic consumer surveys. While companies do use surveys to gather data on consumer attitudes and behavior, it is not specifically mentioned as an excluded method in measuring ROI from sport sponsorships.
Therefore, the correct answer is A. periodic consumer surveys.
Lead Generation and Conversion Rates: For companies looking to generate leads or conversions, they may track metrics like website sign-ups, inquiries, or purchases attributed to the sponsorship.
Surveys and Market Research: While not typically used to directly calculate ROI, companies may use surveys and market research to gather consumer feedback on brand perception, awareness, and association with the sponsorship.
Long-term Brand Loyalty and Recall: Companies may assess the long-term impact of the sponsorship on brand loyalty and recall through measures like customer retention rates and brand preference studies.
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b) false
Answer:
A. True
Explanation:
The term business intelligence refers to the plans, process through which the raw data is to be converted into meaningful information that became relevant for the ethical decision making so that the goals and the objectives of the company could be accomplished.
Data + Process = Information
Collection of information through internal and external parties would also help to analyze the trends, patterns for better decision making.
Therefore, the given statement is true.