Hardmon Enterprises is currently anâ all-equity firm with an expected return of 15.2%. It is considering a leveraged recapitalization in which it would borrow and repurchase existing shares. Assume perfect capital markets. a. Suppose Hardmon borrows to the point that itsâ debt-equity ratio is 0.50. With this amount ofâ debt, the debt cost of capital is 5%. What will be the expected return of equity after thisâtransaction?
b. Suppose instead Hardmon borrows to the point that itsâdebt-equity ratio is 1.50. With this amount ofâ debt, Hardmon's debt will be much riskier. As aâ result, the debt cost of capital will be 7%. What will be the expected return of equity in thisâcase?
c. A senior manager argues that it is in the best interest of the shareholders to choose the capital structure that leads to the highest expected return for the stock. How would you respond to thisâ argument?

1) u.s. real gdp is substantially higher today than it was 60 years ago. what does this tell us, and what does it not tell us, about the well-being of u.s. residents? what are the limitations of the gdp as a measure of economic well-being? given the limitations, why is gdp usually regarded as the best single measure of a society’s economic well-being? 2) what is an intermediate good? how does an intermediate good differ from a final good? explain why it is the case that the value of intermediate goods produced and sold during the year is not included directly as part of gdp, but the value of intermediate goods produced and not sold is included directly as part of gdp.

Which of the following has the largest impact on opportunity cost

Variable rate cd’s = $90 treasury bills = $150 discount loans = $20 treasury notes = $100 fixed rate cds = $160 money market deposit accts. = $140 savings deposits = $90 fed funds borrowing = $40 variable rate mortgage loans $140 demand deposits = $40 primary reserves = $50 fixed rate loans = $210 fed funds lending = $50 equity capital = $120 a. develop a balance sheet from the above data. be sure to divide your balance sheet into rate-sensitive assets and liabilities as we did in class and in the examples. b. perform a standard gap analysis and a duration analysis using the above data if you have a 1.15% decrease in interest rates and an average duration of assets of 5.4 years and an average duration of liabilities of 3.8 years. c. indicate if this bank will remain solvent after the valuation changes. if so, indicate the new level of equity capital after the valuation changes. if not, indicate the amount of the shortage in equity capital.