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- What is the impact on stockholders equity when a company uses equity financing as a source of funding?What is the impact on stockholders equity when a company uses debt financing as a source of funding?The cost of equity is _______. A. the interest associated with debt B. the rate of return required by investors to incentivize them to invest in a company C. the weighted average cost of capital D. equal to the amount of asset turnover
- What is the purpose of financial leverage in finance? a) To increase the company's liquidity b) To reduce the company's risk c) To increase the company's profitability d) To magnify the company's returns and risksLeverage and the Capital Structure. Why is the use of debt financing referred to as financial “leverage?” What is the basic goal of financial management with regard to the capital structure? Is there an easily identifiable debt-equity ratio that will maximize the value of a firm? Why or why not?Discuss the strength and weaknesses of cash-flow based valuation models. How do variations in the required cost of capital for debt and equity shareholders affect valuation?
- What is the blend of long-term financial sources used to finance the firm which may include debt, equity and preferred stock? Select one: a. Risk and Return b. Profit Maximization c. Capital Budgeting d. Working Capital e. None of the optionThe cost of equity is ________. Group of answer choices A. the interest associated with debt B. the rate of return required by investors to incentivize them to invest in a company C. the weighted average cost of capital D. equal to the amount of asset turnoverDescribe stocks and bonds and compare their advantages/disadvantages as a company's two major funding channels. (Explain clearly and in-depth.)
- To identify the cost of equity, which models are better: The dividend growth model or CAPM-derived cost of equity?What effect does financial leverage have on a company's return on equity and its overall valuation? What guiding principles help managers decide on the amount of debt and equity (i.e. the capital structure) they should fund their activities with? Is there an optimal capital structure the firm should target?Which is easier to calculate directly, the expected rate of return on the assets of a firm or the expected rate of return on the firm’s debt and equity?