Why does Greenwood want to use debt instead of equity (an investor) to expand operations? a....
Why does Greenwood want to use debt instead of equity (an investor) to expand operations?
a. debt will reduce cost of capital
b. equity will reduce her control of the company
c. neither
d. both
Homework Answers
Option D is correct
Both
Debt reduces cost of Capital due to interest tax shield and using equity dilutes capital
Add Answer to:
Why does Greenwood want to use debt instead of equity
(an investor) to expand operations?
a....
Please answer ASAP: Issuing debt instead of new equity in a closely held firm is most...
Please answer ASAP: Issuing debt instead of new equity in a closely held firm is most likely to ... cause the owner-manager to work less hard and shirk her duties as she has less capital at risk. cause the owner-manager to consume more perquisites because the cost is passed to the debtholders. cause both more shirking and perquisite consumption since the government provides a tax shield on debt. cause agency costs to fall as the owner-manager does not need to...
for an investor to buy equity in a company than debt It is for a company...
for an investor to buy equity in a company than debt It is for a company to issue equity than debt; it is in the same firm. a. safer, safer b. safer; riskier c. riskier, safer d. riskier; riskier e. none of the above enter a, b, c, d ore Submit Answer format: Text
Use the table below for Problems 22 - 25. The debt and equity columns describe different...
Use the table below for Problems 22 - 25. The debt and equity columns describe different possible capital structures A-G for Company XYZ. The Method 1-3 columns indicate the WACC for capital structures A-G and are consistent with the Modigliani and Miller Propositions Structure Total Assets 8000 4000 1200 1000 800 600 400 Equity 400 400 400 400 400 400 400 Method 1 16.1 3% 13.84% 13.20% 12.24% 1 1.00% 11 .20% 13.00% Method 2Method 3 13.00% 13.00% 13.00% 13.00%...
QUESTION 3 Salma Limited finances its operations 40% debt and 60% equity. The company cost of...
QUESTION 3 Salma Limited finances its operations 40% debt and 60% equity. The company cost of debt is 10%. Stocks of the company currently trade at $55 and dividends of $5 per share was paid. The share is price is expected to grow at a constant rate of 10% a year. • Flotation cost for equity is 5% of the share price; • Tax rate is 30%. Compute the following: a) Cost of ordinary share capital; b) After-tax cost of...
Use the table below for Problems 22 - 25. The debt and equity columns deseribe different...
Use the table below for Problems 22 - 25. The debt and equity columns deseribe different possible capital structures A-G for Company XYZ. The Method 1-3 columns indicate the WACC for capital structures A-G and are consistent with the Modigliani and Miller Propositions EquityMethod Structure Total Assets 8000 4000 1200 1000 800 600 400 400 400 400 400 400 400 400 1 16.13% 13.84% 13.20% 12.24% 1 1.00% 11 .20% 13.00% Method 2Method 3 13.00% 13.00% 13.00% 13.00% 13.00% 13.00%...
Use the table below for Problems 22 - 25. The debt and equity columns describe different...
Use the table below for Problems 22 - 25. The debt and equity columns describe different possible capital structures A-G for Company XYZ. The Method 1-3 columns indicate the WACC for capital structures A-G and are consistent with the Modigliani and Miller Propositions. otal AssetsEquityMethod 1Method 2Method 3 8000 4000 1200 1000 800 600 400 Structure 400 400 00 400 400 400 400 16.13% 13.84% 13.20% 12.24% |11.00% 11.20% 13.00% 5.49% 6.28% 13.00% 13.00% 13.00% 13.00% 13.00% 13.00% 13.00% 947%...
Use the table below for Problems 22 - 25. The debt and equity columns describe different...
Use the table below for Problems 22 - 25. The debt and equity columns describe different possible capital structures A-G for Company XYZ. The Method 1-3 columns indicate the WACC for capital structures A-G and are consistent with the Modigliani and Miller Propositions. Structure Total AssetsEquityMethod 1Method 2 8000 4000 1200 1000 800 600 400 400 400 400 400 400 400 400 16.13% 13.84% 13.20% 12.24% 11.00% 11.20% 13.00% 5.49% 6.28% 9.47% 972% 9.60% 10.73% 13.00% Method 3 13.00% 13.00%...
The Miller-Modigliani Arguments Firm U is all-equity financed, while Firm L is both debt- and equity-financed....
The Miller-Modigliani Arguments Firm U is all-equity financed, while Firm L is both debt- and equity-financed. The following table gives some relevant data on the two firms: (No Taxes) Firm U Firm L Annual expected future cash flow $5 M $5 M Cost of equity (rE) 15% 16% Market value of debt (D) 0 $15 M Cost of debt (rD) N/A 12% Market value of equity (E) ? ? Market value of the firm (V) ? ? Weighted average...
It is _______ for a company to issue equity than debt; it is ________ for an...
It is _______ for a company to issue equity than debt; it is ________ for an investor to buy equity in a company than debt in the same firm. a. safer; safer b. safer; riskier c. riskier; safer d. riskier; riskier e. none of the above enter a, b, c, d or e
Ekson Energy, Inc. (EKS) is an energy company with a market debt-to-equity ratio of 3. Suppose...
Ekson Energy, Inc. (EKS) is an energy company with a market debt-to-equity ratio of 3. Suppose its current cost of debt capital is 6%, and its cost of equity capital is 14%. (a) Calculate EKS’s weighted average cost of capital assuming no taxes and asymmetric information, i.e. Modigliani Miller propositions I and II with no taxes are in place. Part 2: Suppose now that if EKS issues equity and uses the proceeds to repay its debt and reduce its debt-toequity...
for an investor to buy equity in a company than debt It is for a company to issue equity than debt; it is in the same firm. a. safer, safer b. safer; riskier c. riskier, safer d. riskier; riskier e. none of the above enter a, b, c, d ore Submit Answer format: Text
Use the table below for Problems 22 - 25. The debt and equity columns describe different possible capital structures A-G for Company XYZ. The Method 1-3 columns indicate the WACC for capital structures A-G and are consistent with the Modigliani and Miller Propositions Structure Total Assets 8000 4000 1200 1000 800 600 400 Equity 400 400 400 400 400 400 400 Method 1 16.1 3% 13.84% 13.20% 12.24% 1 1.00% 11 .20% 13.00% Method 2Method 3 13.00% 13.00% 13.00% 13.00%...
QUESTION 3 Salma Limited finances its operations 40% debt and 60% equity. The company cost of debt is 10%. Stocks of the company currently trade at $55 and dividends of $5 per share was paid. The share is price is expected to grow at a constant rate of 10% a year. • Flotation cost for equity is 5% of the share price; • Tax rate is 30%. Compute the following: a) Cost of ordinary share capital; b) After-tax cost of...
Use the table below for Problems 22 - 25. The debt and equity columns deseribe different possible capital structures A-G for Company XYZ. The Method 1-3 columns indicate the WACC for capital structures A-G and are consistent with the Modigliani and Miller Propositions EquityMethod Structure Total Assets 8000 4000 1200 1000 800 600 400 400 400 400 400 400 400 400 1 16.13% 13.84% 13.20% 12.24% 1 1.00% 11 .20% 13.00% Method 2Method 3 13.00% 13.00% 13.00% 13.00% 13.00% 13.00%...
Use the table below for Problems 22 - 25. The debt and equity columns describe different possible capital structures A-G for Company XYZ. The Method 1-3 columns indicate the WACC for capital structures A-G and are consistent with the Modigliani and Miller Propositions. otal AssetsEquityMethod 1Method 2Method 3 8000 4000 1200 1000 800 600 400 Structure 400 400 00 400 400 400 400 16.13% 13.84% 13.20% 12.24% |11.00% 11.20% 13.00% 5.49% 6.28% 13.00% 13.00% 13.00% 13.00% 13.00% 13.00% 13.00% 947%...
Use the table below for Problems 22 - 25. The debt and equity columns describe different possible capital structures A-G for Company XYZ. The Method 1-3 columns indicate the WACC for capital structures A-G and are consistent with the Modigliani and Miller Propositions. Structure Total AssetsEquityMethod 1Method 2 8000 4000 1200 1000 800 600 400 400 400 400 400 400 400 400 16.13% 13.84% 13.20% 12.24% 11.00% 11.20% 13.00% 5.49% 6.28% 9.47% 972% 9.60% 10.73% 13.00% Method 3 13.00% 13.00%...
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