Finance
Which of the following statements about capital structure are correct? Select ALL correct answers.
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Which of the following statements about capital structure are correct?
Which of the following statements about capital structure are correct? Select ALL correct answers. A company needs to consider the current economic climate when making decisions on debt and equity proportions. Having too little debt may increase the risk of default repayment. A company should always finance its business using as much debt as possible in order to optimize the capital structure. Having too much equity may dilute earnings and the value of the original investors.
Which of the following is the correct ordering of the capital stack (from most secure to least secure)?
7. Which of the following is the correct ordering of the capital stack (from most secure to least secure)? Senior debt-> Equity -> Subordinated debt Subordinated debt-> Senior debt -> Equity Senior debt -> Subordinated debt-> Equity Equity -> Subordinated debt -> Senior debt9. Which of the following statements about capital structure are correct? Select ALL correct answers. Having too much equity may dilute earnings and the value of the original investors. A company should always finance its business using as much debt as possible in order to...
finance
The common stock and debt of Windows Phone Corp. are valued at $66 million and $38 million, respectively. Investors currently require a 14% return on the common stock and an 9% return on the debt. There are no taxes. WACC=12.17If Windows Phone Corp. issues an additional $15 million of debt and uses this money to retire common stock, what will be the expected return on the stock? Assume that the change in capital structure does not affect the risk of...
Imported Questions - 10/05/2017 2:02 PM Review Later What is the weighted average cost of capital...
Imported Questions - 10/05/2017 2:02 PM Review Later What is the weighted average cost of capital (WACC) for ABC Limited which has the following capital structure? $5m of equity with a cost of equity of 15%; $2m of mezzanine finance with a cost of 9.5%; $1m of senior debt with a cost of debt of 7%. 12.63% 13.73% 9.56% 8.63%
QUESTION 2 A company uses only debt and equity to finance its capital budget. The company...
QUESTION 2 A company uses only debt and equity to finance its capital budget. The company uses CAPM to compute the cost of equity and estimates that WACC is 12%. The capital structure of the company is 75% debt and 25% equity. The following additional information is provided: • Risk-free rate- 6%; • Return on the market 14%; • Tax rate 20%; and • Cost of Debt 12.5%. a) Compute the beta of the company?
Please answer ASAP: The acceptance of a capital budgeting project is usually evaluated on its own...
Please answer ASAP: The acceptance of a capital budgeting project is usually evaluated on its own merits. That is, capital budgeting decisions are treated separately from capital structure decisions. In reality, these decisions may be highly interwoven. This may result in: firms rejecting positive-NPV, all-equity projects because changing to a capital structure with debt will always create negative NPV. never considering capital budgeting projects on their own merits. corporate financial managers first checking with their investment bankers to determine the...
Capital Budgeting and Dividend Policy We examined two very important topics in finance this week; Capital...
Capital Budgeting and Dividend Policy We examined two very important topics in finance this week; Capital Budgeting and Dividend Policy. Critically reflect on the importance of selecting the right projects in which to invest capital. Do we always select those projects that have the highest return on investment? What other factors play into capital budgeting decisions? We also looked at dividend policy. What incentive is there for a company to pay dividends? What signals does dividend policy provide to investors?
Stockholders of a company may be reluctant to finance expansion through issuing more equity because their...
Stockholders of a company may be reluctant to finance expansion
through issuing more equity because
their earnings per share may decrease.
the price of the stock will automatically decrease.
dividends must be paid on a periodic basis.
leveraging with debt is always a better idea.
H.cengagu.com MindTap - Cengage Learning 4610 RVC 1198 CENGAGE MINDTAP Assignment 13 - Capital Structure and...
H.cengagu.com MindTap - Cengage Learning 4610 RVC 1198 CENGAGE MINDTAP Assignment 13 - Capital Structure and Leverage 5. Capital structure decisions and firm value Aa Aa Why focus on the optimal capital structure? A company's capital structure decisions address the ways a firm's assets are financed (using debt, preferred stock, and common equity capital) and is often presented as a percentage of the type of financing used. As with all financial decisions, a firm should try to establish a capital...
5. Financial management decisions and their effect on firm value Financial managers make a variety of...
5. Financial management decisions and their effect on firm value Financial managers make a variety of decisions that can affect a firm's value. These include capital budgeting, capital structure, and dividend policy decisions. A financial manager's decisions and actions are evaluated against the criterion of their effect on the price of the firm's common stock. Good decisions result in increasing share prices and increasing shareholder wealth, while poor decisions achieve the opposite result. Many of the financial decisions that affect...
Imported Questions - 10/05/2017 2:02 PM Review Later What is the weighted average cost of capital (WACC) for ABC Limited which has the following capital structure? $5m of equity with a cost of equity of 15%; $2m of mezzanine finance with a cost of 9.5%; $1m of senior debt with a cost of debt of 7%. 12.63% 13.73% 9.56% 8.63%
QUESTION 2 A company uses only debt and equity to finance its capital budget. The company uses CAPM to compute the cost of equity and estimates that WACC is 12%. The capital structure of the company is 75% debt and 25% equity. The following additional information is provided: • Risk-free rate- 6%; • Return on the market 14%; • Tax rate 20%; and • Cost of Debt 12.5%. a) Compute the beta of the company?
Stockholders of a company may be reluctant to finance expansion
through issuing more equity because
their earnings per share may decrease.
the price of the stock will automatically decrease.
dividends must be paid on a periodic basis.
leveraging with debt is always a better idea.
H.cengagu.com MindTap - Cengage Learning 4610 RVC 1198 CENGAGE MINDTAP Assignment 13 - Capital Structure and Leverage 5. Capital structure decisions and firm value Aa Aa Why focus on the optimal capital structure? A company's capital structure decisions address the ways a firm's assets are financed (using debt, preferred stock, and common equity capital) and is often presented as a percentage of the type of financing used. As with all financial decisions, a firm should try to establish a capital...
5. Financial management decisions and their effect on firm value Financial managers make a variety of decisions that can affect a firm's value. These include capital budgeting, capital structure, and dividend policy decisions. A financial manager's decisions and actions are evaluated against the criterion of their effect on the price of the firm's common stock. Good decisions result in increasing share prices and increasing shareholder wealth, while poor decisions achieve the opposite result. Many of the financial decisions that affect...
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