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What would happen in Ginny’s Restaurant if you introduce each of the following factors? Explain your...

What would happen in Ginny’s Restaurant if you introduce each of the following factors? Explain your logic.

  1. Taxes
  2. Differential interest rates
  3. Information asymmetry
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Answer #1

1.Taxes - If we introduce taxes into the Ginny's restaurant, The overall profit that is left for equity shareholders will decrease.

2. Differential interest rates- The differential interest rate is difference of interest rate between two Currency pair and if the American currency is strong in comparison to the other currency, Ginny's Restaurant will gain .

3.Information assymetry - Information asymmetries are situation where one party have better information than the other party. So lf Ginny's restaurant has better information than other party , then it will eventually gain in profit by monetising it.

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