Money Growth and Inflation Suppose the nominal interest rate on car loans is 8% per year. If borrowers and lenders expect an inflation rate of 5% per year, the expected real interest rate is per year. Suppose the Bank of Canada unexpectedly increases the growth rate of the money supply, causing the inflation rate to rise unexpectedly from 5% to 7% per year. In the short run, the real interest rate on car loans will to per year. The unanticipated change in inflation arbitrarily harms . Now consider the long-run impact of the change in money growth and inflation. According to the Fisher effect, as expectations adjust to the new, higher inflation rate, the nominal interest rate will to per year.

Calculate the cost of each capital component—in other words, the after-tax cost of debt, the cost of preferred stock (including flotation costs), and the cost of equity (ignoring flotation costs). use both the capm method and the dividend growth approach to find the cost of equity.calculate the cost of new stock using the dividend growth approach.what is the cost of new common stock based on the capm? (hint: find the difference between re and rs as determined by the dividend growth approach and then add that difference to the capm value for rs.)assuming that gao will not issue new equity and will continue to use the same target capital structure, what is the company’s wacc? e. suppose gao is evaluating three projects with the following characteristics.each project has a cost of $1 million. they will all be financed using the target mix of long-term debt, preferred stock, and common equity. the cost of the common equity for each project should be based on the beta estimated for the project. all equity will come from reinvested earnings.equity invested in project a would have a beta of 0.5 and an expected return of 9.0%.equity invested in project b would have a beta of 1.0 and an expected return of 10.0%.equity invested in project c would have a beta of 2.0 and an expected return of 11.0%.analyze the company’s situation, and explain why each project should be accepted or rejected g

Atrough in the business cycle occurs when

Only the united states has embassies. true or false