Explain the Leverage and the Incremental Cost of Debt with example?

Q: Assume that the risk-free rate increases, but the market risk premium remains constant. What impact…

A: Risk free rate is free from the risk. Every rate of return given is depends on the risk free rate.

Q: Explain term Buydown Loans with examples?

A: Buy down loan is a loan in which a buyer will get the loan for reduced interest rate at least during…

Q: How much is the gain on debt restructuring?

A: Given data,   Old liability: Principal=P9,000,000 Accrued Interest=P810,000 Interest Rate: 9%   New…

Q: What are the relative advantages of equity versus debt financing?

A: Equity financing is selling a stake in your firm in return for a monetary investment. In contrast to…

Q: What is the cost of equity based on the own-bondyield-plus-judgmental-risk-premium method?

A: Answer: Bond-yield-plus-judgemental-risk-premium method involves adding a judgemental risk premium…

Q: State the advantages of long-term debt financing.

A: Long Term Debt Financing: It refers to the debt financing required by the firm which usually has a…

Q: Compare and contrast financing with debt vs. equity.  What is being financed?

A: Financing refers to raising the funds from different sources in order to carry out the business…

Q: Why is there a positive leverage from use of debt? How can we tell that?

A: Positive leverage: Leverage is the concept of investment by using the borrowed funds. Positive…

Q: What does maturity matching mean, and what is the advantage of this financingpolicy?

A: Maturity matching or hedging approach: It is a working capital financing system where we fund short…

Q: Explain an example of debt investment.

A: Debt Investment Debt Investment is refer as when the company raises the money by selling the debt…

Q: b. What is the market interest rate on Coleman's debt and its component cost of debt?

A: Given: The firm tax rate is 25% The current price of coleman’s is 12% The current price of firm is…

Q: What is market debt ratio?

A: Debt ratio: The debt ratio is a financial ratio that quantifies the degree of a corporation’s…

Q: Explain how behavioural finance is related to market anomalies

A: Behavioural finance is the study of the behaviour of investors in making investment decisions.…

Q: What is return formula for bond?

A: Solution-      Bonds-                  A bond is a fixed financial gain instrument that represents a…

Q: What is Basic Calculations of Financial Leverage?  Please provide example.

A: Financial Leverage:It represents that how a company uses its debt to acquire assets. It also shows…

Q: What is financial leverage? Explain the concept in relation to fina

A: Financial leverage: Financial leverage is the borrowing of debt to finance assets of the…

Q: Define the term s financial leverage?

A: Financial leverage means buying the asset by taking the debt. The company always uses leverage…

Q: What is duration gap model? Explain the concept of duration. How duration measure can be used to…

A: Duration gap measures the mismatch between the duration of assets and liabilities held by a…

Q: What are the advantages and disadvantages of debt financing? Of equity finacing?

A: Financing is a process of providing funds for business activities, making purchases, and investing.…

Q: The higher the debt level, the greater the burden borne by ___________ and the cost of debt.

A: The cost of debt is the rate a company pays on its debt

Q: Explain Financial Leverage?

A: Companies going for purchase of assets have three options for financing. They are equity, debt &…

Q: to

A: Why do we use the market value of debt and equity to estimate WACC instead of the book value :…

Q: Define cost of equity? How does it relate to the ‘required rate of return’ (r) on equities?

A: Definition of Cost Equity: Cost of equity is the return that a company requires for an investment or…

Q: Why is EBIT generally considered to be independent of financial leverage?Why might EBIT be…

A: Introduction: In finance, leverage is a general concept to combine gains and losses by some…

Q: Is there a readily recognisable debt-to-equity ratio that maximises a firm's value? What are your…

A: The debt-to-equity ratio is derived by dividing a company's total debt by its total equity. This…

Q: What is a good capital structure? Are low debt ratios always favorable?

A: The capital structure of a corporation is the exact combination of debt and equity used to support…

Q: Define Financial leverage.

A: Leverage: Leverage measures overlook the mixture of debt and equity which is required for analyzing…

Q: Illustrate how the debt-to-equity ratio impacts the return on equity?

A: A high debt-equity ratio can be acceptable in light of the fact that it shows a firm can without…

Q: (c)Critically evaluate the merits and demerits of using long-term debt as a source of finance as…

A: The question is based on the concept of capital structure and components of capital structure.

Q: Calculate Times interestearned Return on Financial leverage

A: Ratio analysis: This is the quantitative analysis of financial statements of a business enterprise.…

Q: should we expect the flotation costs for debt to be significantly lower than those for equity

A: Flotation costs are the expenses incurred by a firm when it issues fresh stock. Flotation costs…

Q: Calculate Debt-to-equity Times interest earned Return on Financial leverage

A: Debt to equity=Outsiders' FundsShareholders' Funds 2019 2018 2017 2016 36,683,0008,573,000=4.28…

Q: Explain why a long term creditor should be interested in liquidity ratios. Include some examples or

A: Introduction : In simple word, the liquidity of a business refers to the amount of cash or easily…

Q: What happens to the costs of debt and equity when leverageincreases? Explain.

A: Introduction: The term leverage is nothing but using borrowed funds as a source of funding when the…