How does borrowing fit into the financial budget of a company? When might they decide it...
How does borrowing fit into the financial budget of a company? When might they decide it is worthwhile to borrow the funds needed to implement a project?
Homework Answers
Every company needs funds and finances for its projects. This Finance comes either by way of equity or by external borrowings. The borrowings may be in the form of loans or bonds issued to the general public.
The company may find it worthwhile to raise money by way of borrowings if the cost of borrowings is lesser than the cost of equity. Interest paid on borrowings is tax deductible and this reduces the cost of borrowings. A project is assessed by way of its discounted future cash flows. The discount rate is the cost of capital of the business. Lower the discount rate higher will be the cash flows and the project will become more viable.
Hence the company may reduce its cost of capital by opting for borrowings rather than by way of equity.
Add Answer to:
How does borrowing fit into the financial budget of a company?
When might they decide it...
Increased government borrowing, combined with increased taxes, might do the trick. How is it possible that...
Increased government borrowing, combined with increased taxes, might do the trick. How is it possible that in the face of rising expenditures, the budget surplus may increase in the above situation? How and from whom does the government borrow?
In the audit of a non-public company, when might an auditor decide not to test internal...
In the audit of a non-public company, when might an auditor decide not to test internal controls?In the audit of a non-public company, when might an auditor decide not to test internal controls?
How does a company decide just how much debt they can take on? As a shareholder,...
How does a company decide just how much debt they can take on? As a shareholder, would you be okay with a company issuing more shares, thus making your share worthless, what might it depend on?
How does the supply or demand for loanable funds shift when a country increases its budget...
How does the supply or demand for loanable funds shift when a country increases its budget deficit? O a. The demand for loanable funds shifts right. 10 b. The supply of loanable funds shifts right. 10 c. The demand for loanable funds shifts left. O d. The supply of loanable funds shifts left.
Financial Markets & Produc ABC company limited has funded its operations by bank loans extensively. The...
Financial Markets & Produc ABC company limited has funded its operations by bank loans extensively. The interest rate on the loans is tied to the market interest rates and is adjusted every six months. Thus the cost of funds is sensitive to interest rate movements. Because of expectations that Ghanaian economy would strengthen during the next year, the company plans further growth through investments. The company expects that it will need substantial long-term financing to finance its growth and plans...
18) Governments are likely to borrow funds from the financial markets by A. selling bonds when...
18) Governments are likely to borrow funds from the financial markets by A. selling bonds when there is a budget surplus. B. selling bonds when there is a trade surplus. C. selling bonds when there is a budget deficit. D. buying bonds when there is a trade deficit. ОА OB O D • С
In the audit of a non-public company, when might an auditor decide not to test internal...
In the audit of a non-public company, when might an auditor decide not to test internal controls? a. it is more cost effective to test ending account balances b. the controls are not operating effectively c. assessment of control risk is high d. all of the above
In the audit of a non-public company, when might an auditor decide not to test internal...
In the audit of a non-public company, when might an auditor decide not to test internal controls? a. It is more cost effective to test ending account balances b. The controls are not operating effectively c. Assessment of control risk is high d. All of the above
Two countries decide to specialize in producing certain goods to export to other countries, and in...
Two countries decide to specialize in producing certain goods to export to other countries, and in return they import different goods from these other countries. The advantage of these exports and imports is: the country will be able to consume at a point outside your production possibilities frontier the countries will be able to produce and consume at a point outside your production possibilities frontier. the country will be able to produce at a point outside your production possibilities frontier....
I am creating a Financial plan for Stanley black and Decker, Determine why funding is needed...
I am creating a Financial plan for Stanley black and Decker, Determine why funding is needed for the company. Determine the sources of funding. Consider self-funding, borrowing, equity, venture capital, etc. Evaluate the requirements of each funding source you determined appropriate. Analyze the associated risks of each funding source. Decide which sources are the best fit for your company based on the requirements of each. Justify your decision.
How does the supply or demand for loanable funds shift when a country increases its budget deficit? O a. The demand for loanable funds shifts right. 10 b. The supply of loanable funds shifts right. 10 c. The demand for loanable funds shifts left. O d. The supply of loanable funds shifts left.
18) Governments are likely to borrow funds from the financial markets by A. selling bonds when there is a budget surplus. B. selling bonds when there is a trade surplus. C. selling bonds when there is a budget deficit. D. buying bonds when there is a trade deficit. ОА OB O D • С
Two countries decide to specialize in producing certain goods to export to other countries, and in return they import different goods from these other countries. The advantage of these exports and imports is: the country will be able to consume at a point outside your production possibilities frontier the countries will be able to produce and consume at a point outside your production possibilities frontier. the country will be able to produce at a point outside your production possibilities frontier....
Most questions answered within 3 hours.
-
A uniform electric field exists in a region between two
oppositely charged plates. An electron is...
asked 1 minute ago -
The energy levels of a quantum mechanical system are given by
the equation: En = -hfo/√n^2+9....
asked 23 minutes ago -
Calculate the molality of an aqueous solution of iron (II)
nitrate with a solute mole fraction...
asked 33 minutes ago -
Use the adjusted trial balance for Stockton Company. Determine
the current asset.
Stockton Company
Adjusted Trial...
asked 25 minutes ago -
Mry has net and taxable income of $55000; her claim for
charitable donation is $4000. How...
asked 42 minutes ago -
Independent random samples were selected from two binomial
populations, with sample sizes and the number of...
asked 43 minutes ago -
Calculate the wavelength of light (in nanometers) emitted from a
hydrogen atom if the electron is...
asked 54 minutes ago -
Please answer in Python 3! 16.2** (Maximum increasingly ordered
subsequence) Write a program that prompts the...
asked 58 minutes ago -
Energy is carried by which of the following waves?
(Select all that apply)
a) light wave...
asked 58 minutes ago -
(Part 1) An investor wants to have $1,000,000 when she retires
in 20 years. If she...
asked 59 minutes ago -
ESP8266/Arduino UNO and temperature sensor MCP9700A.
Temperature sensor gives incorrect temperature readings in
celsius.
Both ESP8266...
asked 1 hour ago -
1. Why has Dunkin’ Donuts increased its focus on
coffee?
2. Describe the strategy that Dunkin’...
asked 1 hour ago