If managers of a company have inside information about the company’s future performances and such inside information is unknown to outsiders, then the company’s managers are most likely to use _____ to finance its project investment Group of answer choices a. the company’s retained earnings b. debt borrowing from banks c. share issuance to new investors d. there is no difference among the above three funding options

If managers of a company have inside information about the company’s future performances and such inside information is unknown to outsiders, then the company’s managers are most likely to use _____ to finance its project investment Group of answer choices a. the company’s retained earnings b. debt borrowing from banks c. share issuance to new investors d. there is no difference among the above three funding options

Fundamentals Of Financial Management, Concise Edition (mindtap Course List)

10th Edition

ISBN:9781337902571

Author:Eugene F. Brigham, Joel F. Houston

Publisher:Eugene F. Brigham, Joel F. Houston

Chapter13: Capital Structure And Leverage

Section: Chapter Questions

Problem 14SP: WACC AND OPTIMAL CAPITAL STRUCTURE Elliott Athletics is trying to determine its optimal capital...

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What is the blend of long-term financial sources used to finance the firm which may include debt, equity and preferred stock? اخترأحد الخيارات a. Risk and Return b. Capital Budgeting c. Profit Maximization d. None of the option e. Working Capital Creditors look for a. Net working capital for their safety b. High net working capital for their safety c. Less net working capital for their safety d. None of the options e. Balance net working capital for their safety
The idea of determining the WACC is to identify the relevant cost of utilizing funds provided by different sources. TRUE OR FALSE. Flotation costs can be represented by the amount of costs a company pays to raise capital through authorizing sale of company ownership. TRUE OR FALSE Issuing new preferred shares should be the firm's last resort of raising new funds. TRUE OR FALSE
In financial analysis, it is important to select an appropriate discount rate. A project’s discount rate must be high to compensate investors for the project’s risk. The return that shareholders require from the company as a compensation for their investment risk is referred to as the cost of equity. Consider this case: Weghorst Co. is a 100% equity-financed company (no debt or preferred stock); hence, its WACC equals its cost of common equity. Weghorst Co.’s retained earnings will be sufficient to fund its capital budget in the foreseeable future. The company has a beta of 1.35, the risk-free rate is 4.5%, and the market return is 5.9%. What is Weghorst Co.’s cost of equity? 1.95% 19.08% 8.02% 6.39% Weghorst Co. is financed exclusively using equity funding and has a cost of equity of 10.65%. It is considering the following projects for investment next year: Project Required Investment Expected Rate of Return W $23,575 9.65% X…
The finance manager is carefully selecting the best investment alternatives for a stable return from the investment opportunities. Which of the following role he is executing in the company? Select one: A. Financing Decision B. Interrelation with Departments C. None of the given options D. Investment Decision
The stockholders’ claim in a levered firm can beviewed as a call option; stockholders have the optionto purchase the firm’s assets by paying off its debt.What incentives does this provide to stockholdersand managers in choosing investment projects?
Vodafone, like many emerging telecom carriers, has only limited and infrequent access to domestic debt and equity markets. As a financial management of Ait, how would you be able to demonstrate to the Board of Directors and convince them as to why the Net Present Value and Internal Rate of Return capital budgeting decision rules sometimes provide different rank orderings of investment project alternatives?.
We can imagine the financial manager doing several things on behalf of the firm's stockholders. For example, the manager might: Make shareholders as wealthy as possible by investing in real assets. Modify the firm's investment plan to help shareholders achieve a particular time pattern of consumption. Choose high- or low-risk assets to match shareholders' risk preferences. Help balance shareholders' checkbooks. But in well-functioning capital markets, shareholders will vote for only one of these goals. Which one? Why?
If a firm plans to issue new stock, flotation costs (investment bankers' fees) should not be ignored. There are two approaches to use to account for flotation costs. The first approach is to add the sum of flotation costs for the debt, preferred, and common stock and add them to the initial investment cost. Because the investment cost is increased, the project's expected rate of return is reduced so it may not meet the firm's hurdle rate for acceptance of the project. The second approach involves adjusting the cost of common equity as follows: The difference between the flotation-adjusted cost of equity and the cost of equity calculated without the flotation adjustment represents the flotation cost adjustment. Quantitative Problem: Barton Industries expects next year's annual dividend, D1, to be $2.50 and it expects dividends to grow at a constant rate g = 4.3%. The firm's current common stock price, P0, is $20.00. If it needs to issue new common stock, the firm will encounter a 6%…
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The negative working capital occurs when the اخترأحد الخيارات a. None of the options b. Current equity exceed current assets c. Current assets exceed current equity d. Current liabilities exceed current assets e. Current assets exceed current liabilities Which of the following statement is correct? اخترأحد الخيارات a. Capital structure of a company may comprise of Equity Share Capital, Preference Share Capital and Debentures b. Working capital refers to the mix of different sources of long-term funds c. None of the statement is correct d. Capital expenditure decisions do not involve commitment of large sums of money e. Capital structure is a method of analyzing and comparing substantial future investments and expenditures to determine
Which of the following statements correctly translates into funding? Group of answer choices Funding is impossible if a company has sufficient assets to hold a short-term security Funding can be derived from the overall debt and shareholdings of a specific corporation Funding is the realization of all assets into cash to be paid for all the liabilities withheld
Companies that face large investments they cannot finance internally through the retention of earnings must go to the financial market to raise the needed funds. When they do this, they will incur what are commonly referred to as floatation costs. Discuss how these floatation costs should be incorporated into the firm’s analysis of net present value