Give a detailed explanation

QUESTION ONE In a mixed economy, two of the objectives of a government could be; (a) To minimise its borrowing requirements; and (b) To reduce the taxation of incomes. Required (a) Identify the general economic effects of these policies on private sector businesses. (b) Discuss what particular effects might result from attempts to achieve these objectives by each of: () Reductions in public expenditure; (1) Increases in charges made for the products or services of nationalised industries; (mii) Selling nationalised assets. QUESTION TWO Outline how a major refurbishment of publicly funded hospital facilities might affect the Public Sector Borrowing Requirement. Discuss and give examples of how governments assist companies in their financing requirements. QUESTION THREE The problem with selling off profitable publicly owned undertakings is that in the long term government, and therefore the taxpayer, loses out by forfeiting the future stream of profits. Required: Discuss briefly the validity of the above statement.Companies U and L are identical in every respect except that U is unlevered while L has Sh 10 million of 5% bonds outstanding. Assume (a) That all of the MM assumptions are met (b) That there are no corporate or personal taxes That EBIT is Sh 2 million That the cost of equity to company U is 10% Required: Determine the value MM would estimate for each firm Determine the cost of equity for both firms 111. What is the overall cost of capital for both firms IV. Suppose the value of U is Sh 20 million and that of L. is Sh 22 million. Explain the arbitrage process for a shareholder who owns 10% of company L's shares