You are the 100% owner of a company and want to invest in a new investment...
You are the 100% owner of a company and want to invest in a new investment but you are lacking the funds. You can either issue debt or equity. What is the cheaper source of money and why?
Homework Answers
As the investor is primarily looking for a cheaper source of capital.
Debt Financing should be used for the new Investment over equity, due to the following reasons:
1. Debt is the least expensive source of long-term
financing.
2. It gives you flexibility in your capital structure.
3. The interest on the debt provides the company with the benefit
of tax saving.
4. There is no interference in business operations by the lenders
because they are not entitled to vote (no ownership).
5. Your payback only limited to the interest payment+ principal,
and DO NOT share of any profits made by the company - which makes
it a cheaper source of capital.
Add Answer to:
You are the 100% owner of a company and want to invest
in a new investment...
Assume you are working in an investment company as an investment advisor. You have a new...
Assume you are working in an investment company as an investment advisor. You have a new individual investor ( called Kim) who wants to invest in financial securities. Kim is 45 years old, married with 3 kids (all in school), works as a marketing manager in an international pharmaceutical company and lives in a big apartment with his family in New York City. Kim is a new investor who is looking for a long-term investment horizon and aiming income gain from...
You have $100,000 to invest. Investment Horizon is 15 years, at which point you will use...
You have $100,000 to invest. Investment Horizon is 15 years, at which point you will use the money as a downpayment on a house. You don't plan to use the money until then, but should you need it, it can be used as an emergency fund. You are required to invest in Vanguard mutual funds, and only that. https://investor.vanguard.com/mutual-funds/list#/select-funds/asset-class/month-end-returns - List of funds Pick any from one to six funds, and decide how much of the $100,000 you want to...
Imagine you have $10,000 that you want to invest and you want to invest in some...
Imagine you have $10,000 that you want to invest and you want to invest in some bonds. *You would be looking at the coupon rate (which is the interest rate that it will pay) since you want to get the highest return on your investment *You would also be looking at the risk rating to make sure it is not too risky or you might lose your money if the company gets into trouble financially. choose any company Example Microsoft...
4. Your small company has $25,000 in surplus cash right now. You don't want to commit...
4. Your small company has $25,000 in surplus cash right now. You don't want to commit these funds to any long-term investments because you know of some expenses coming up in about eight months that will require the use of this cash. But you would like to find some safe, liquid interest-earning investments where you could park your cash until it is needed. You've decided that T-bills and money market mutual funds are your best options, but you want to...
3. (1 pts) Suppose a mutual fund offers you an investment opportunity. For each $100 investment...
3. (1 pts) Suppose a mutual fund offers you an investment opportunity. For each $100 investment today, it will pay you $5 per year forever. The interest rate in the loanable funds market is 10%. You can inherit your investment or sell anytime. Would you invest? Why or why not? Show your work!
You would like to invest $128327 in an investment that has an expected rate of return...
You would like to invest $128327 in an investment that has an expected rate of return of 13.38%. You plan to borrow 61% of the money ($78279.47) from a friend, so that you will put up $50047.53 of your own money. The cost of debt (interest rate on the loan) is 10.62% and there are no taxes or transaction costs. With the arrangement, what will be the expected rate of return on your equity investment of $50047.53? (Percent with...
You would like to invest $125396 in an investment that has an expected rate of return...
You would like to invest $125396 in an investment that has an expected rate of return of 17.52%. You plan to borrow 27% of the money ($33856.92) from a friend, so that you will put up $91539.08 of your own money. The cost of debt (interest rate on the loan) is 11.78% and there are no taxes or transaction costs. With the arrangement, what will be the expected rate of return on your equity investment of $91539.08? (Percent with 2...
You would like to invest $109543 in an investment that has an expected rate of return...
You would like to invest $109543 in an investment that has an expected rate of return of 17.34%. You plan to borrow 61% of the money ($66821.23) from a friend, so that you will put up $42721.77 of your own money. The cost of debt (interest rate on the loan) is 13.76% and there are no taxes or transaction costs. With the arrangement, what will be the expected rate of return on your equity investment of $42721.77? (Percent with 2...
Your are the financial manager of Banana company, and the company want invest f this project...
Your are the financial manager of Banana company, and the company want invest f this project is about 100 millions RMB which include 90 million RMB (nvestment for fixed asset and 10 millions for working capital. The tax law permIt Banana depreciate all tired asset in 5 years in straight-line method, and the marginal rate is 40% . According to your experience, you forecast the sales of new project in future 5 years as described in table 1, and from...
Assume that you invest $100 at time zero and that your investment is worth $110 one...
Assume that you invest $100 at time zero and that your investment is worth $110 one period later. A. Did you make any money? How much in dollars? How much in percent return on investment? B. Use the rate of return on investment from your previous answer as the discount rate and compute what the NPV of your investment was. What is the NPV? Did you make any money? C. What does this say about a zero-NPV investment?
4. Your small company has $25,000 in surplus cash right now. You don't want to commit these funds to any long-term investments because you know of some expenses coming up in about eight months that will require the use of this cash. But you would like to find some safe, liquid interest-earning investments where you could park your cash until it is needed. You've decided that T-bills and money market mutual funds are your best options, but you want to...
3. (1 pts) Suppose a mutual fund offers you an investment opportunity. For each $100 investment today, it will pay you $5 per year forever. The interest rate in the loanable funds market is 10%. You can inherit your investment or sell anytime. Would you invest? Why or why not? Show your work!
You would like to invest $125396 in an investment that has an expected rate of return of 17.52%. You plan to borrow 27% of the money ($33856.92) from a friend, so that you will put up $91539.08 of your own money. The cost of debt (interest rate on the loan) is 11.78% and there are no taxes or transaction costs. With the arrangement, what will be the expected rate of return on your equity investment of $91539.08? (Percent with 2...
You would like to invest $109543 in an investment that has an expected rate of return of 17.34%. You plan to borrow 61% of the money ($66821.23) from a friend, so that you will put up $42721.77 of your own money. The cost of debt (interest rate on the loan) is 13.76% and there are no taxes or transaction costs. With the arrangement, what will be the expected rate of return on your equity investment of $42721.77? (Percent with 2...
Your are the financial manager of Banana company, and the company want invest f this project is about 100 millions RMB which include 90 million RMB (nvestment for fixed asset and 10 millions for working capital. The tax law permIt Banana depreciate all tired asset in 5 years in straight-line method, and the marginal rate is 40% . According to your experience, you forecast the sales of new project in future 5 years as described in table 1, and from...
Most questions answered within 3 hours.
-
Vulcan Flyovers offers scenic overflights of Mount St. Helens,
the volcano in Washington State that explosively...
asked 33 seconds from now -
If organizations do not adapt fast enough and move incrementally
from the twentieth-century model to the...
asked 16 seconds ago -
A helium balloon with 2.5L of gas has a gauge pressure of 10,000
Pa. The balloon...
asked 4 minutes ago -
What is responsible for Jupiter's enormous magnetic field?
asked 19 minutes ago -
At the end of the year, a company offered to buy 5,000 units of
a product...
asked 21 minutes ago -
Implement C++ program for each of the following.
Let D = [-48, -14, -8, 0, 1,...
asked 41 minutes ago -
Consider a labor market in which LD = 400 – 4W and LS = 250 +...
asked 55 minutes ago -
Let’s say you are teaching a typically-developing young child
how to eat with a spoon. Describe...
asked 38 minutes ago -
Ask Your Teacher A toy gun uses a spring to project a 5.6-g soft
rubber sphere...
asked 50 minutes ago -
*****DO NOT ANSWER THIS QUESTION IF YOU DON'T
KNOW*******
Question - PERSONAL DEVELOPMENT ESSAY and Detailed...
asked 57 minutes ago -
A certain rifle bullet has a mass of 5.25 g. Calculate the de
Broglie wavelength of...
asked 1 hour ago -
Research new software products that assist in project
communication management. Write a paper summarizing your findings,...
asked 1 hour ago