Financial Risk Do you think 54% return for the levered firm's shareholders is better than 30% return for the unlevered shareholders? Why? Why not?
You just can't look returns at standalone .
It's better if company is able to meet its debt repayments and has healthy financial statements so as to meet its future debt liabilities. In this case having debt on company and providing higher return is good.
But if it seems company might not be able to meet its liabilities in near future, in that case debt shareholders priority comes first over assets than equity shareholders and in this case you won't be getting your desired return.
It's true that higher returns comes with leverage but then it should be looked that is company able to meet its debt liability.
Financial Risk Do you think 54% return for the levered firm's shareholders is better than 30%...
2. Consider Table 1 Table 1 Levered Firm L Liabilities and Shareholders' Equit Assets 100 200 Equi Assets 100 Debt Total 200 200 Total Additional Financial Information for Levered Firm L 80 Earnings Before Interest and Tax Cost of debt capital 8% 12% 255% Cost of unlevered equi Corporate tax rate 15% 30% Personal tax rate on debt income Personal tax rate on equity income Consider Table 1. Calculate the interest expense, earnings before taxes, the tax liability, and the...
12-2) Digital Design (DD) has a beta of 0.75. The tax rate is 30% and DD is financed with 40 % debt. Unlevered Bels What is the company's unlevered beta? 12-3, Ethier Enterprise has an unlevered beta of 1.0. Ethier is financed with 50% debt and has a Premum fo levered beta of 1.6. If the risk-free rate is 5.59% and the market risk premium is 6%, how much is Financial Risk the additional premium that Ethier's shareholders require to...
Which online digital media services do you think is better and why? And how is it better than what it replaced?
What are business risk and financial risk? How do each influence the firm's capital structure decisions?
Do you think a faster delivery system for healthcare a better system? Why or why not? Do you think that healthcare is in the service or manufacturing sector, or does it have elements of both?
From a personal point of view, do you this think it is better to lease or purchase? Why?
-Do any of the 5 principles (risk return trade off, time value of money, leverage, liquidity vs profitability, matching principles, portfolio effect, valuation) stand out at you based on anything you've experienced? -The book discusses the recent Global Financial Crisis. Do you expect another crisis in the future? Why or why not? -What do you think were the causes of the last financial crisis? -Any ideas on how changes can be made to lower the chances of a future meltdown?
If you're active, do you think you are at risk of losing electrolytes during your activity (why or why not?).
Activity-based costing (ABC) or traditional costing do you think is a better approach to costing and why? Be sure to include in your discussion how you think the method you selected is helpful to managers and would benefit the company as a whole.
Describe why you think accrual accounting helps the reader of financial statements better understand a company’s financial position, compared to cash basis accounting. Include in your answer a description of the matching concept and provide an example, taken from class lecture or assigned problems, of a transaction that honors the matching concept. It may help you to consider how net income is impacted by recorded revenue when it is earned rather than when cash is collected. Content, concept application, and...