When a corporation invests borrowed money in assets that generate profits greater than the after-tax cost of the debt, it increases the return on equity for common shareholders. creates financial leverage. has a mix of debt and equity in its capital structure. does all of these options.   If the effective rate of interest is greater than the contract rate, the bonds will sell at par. a premium. a discount. any of these choices, depending on other circumstances.

Q: Why might a large corporation want to raise long-term capital through a borrowing money from…

A: Raising money from financial institutions increases the likelihood of finding investors who share…

Q: how the zero-coupon rate bond provides return to the investor and gives the advantages to the…

A: A zero coupon bond is a fixed income security which is sold at a deep discount to its face value.…

Q: debt financing.

A: Debt financing refers to the amount which is raised by the company after selling the debt…

Q: It has been suggested that in a world with only corporate taxation the value of the firm = the value…

A: Capital structure of a firm signifies the mix of equity and debt used for financing the business.…

Q: Which of the following statements support reasons that companies make investments? Select all that…

A: Introduction:- Companies make investment for getting income from non operating activities.…

Q: What is the difference between financing a corporation with debt vs equity Provide an example of…

A: There are different sources of finance that a corporation can use for its business purpose when it…

Q: a corporation is said to have a complex capital structure when the company has:   a. potential…

A: Complex capital structure refers to capital structure related to corporates which consists of…

Q: primary way a corporation can raise money through Equity financing

A: Primary market is market where money is raised via public by issue of stock.

Q: Which of the following statement is incorrect?

A: The retirement of long term debt calls means that the debt represented by the bond are paid by the…

Q: Which of the following can be described as involving direct finance? A. People buy shares in a…

A: Direct finance does not involve any intermediate party or a third party. There is a direct…

Q: when attempting to raise cash, a company may find it more advantageous to issue bonds rather than…

A: Bonds are the financial liability issued by the Company to raise capital which have a tax advantage…

Q: it typically has a higher cost of capital than equity. it carries voting rights.

A: Debt financing occurs when a company raises capital by selling debt instruments to investors. The…

Q: Golden Gate Construction Associates, a real estate developer and building contractor in San…

A: EVA as a residual income measure of financial performance is simply the operating profit  after tax…

Q: Golden Gate Construction Associates, a real estate developer and building contractor in San…

A: Weighted Average Cost of Capital

Q: Suppose you are the president of a small, publicly-traded corporation. Since you believe that your…

A: The company’s expected rate to make a payment on average to its holders of the security for…

Q: ntion that in the absence of the tax advantages of debt the use of gearing can increase the expected…

A: The use of debt is very common in organization because the debt had the tax advantages due to which…

Q: 1) A corporation may choose to use debt financing because a) it has an income tax advantage. b) it…

A: In case of multiple questions, we are allowed to solve only the first question. In case if you want…

Q: Which of the following statements best describes how a corporation determines its cost of capital?…

A: Cost of Capital is the rate of return the firm expects to earn from its investment in order to…

Q: Assume that the return on tax-exempt securities is 0.09 and that tp = 0.3, tg = 0.15, and te = 0.35,…

A: “Since you have asked multiple sub-parts, we will solve the first three sub-parts for you.  If you…

Q: Holding everything else constant, which of the following statements is TRUE? * If amendments to the…

A: Interest on debt is a tax free expense, thus companies always take after tax cost debt in to…

Q: In financing their operations, corporations have the options of raising capital by issuing stock or…

A: corporations have the option of raising the capital by issuing  - stocks (equity capital) - debt…

Q: An advantage to a corporation of issuing bonds rather than issuing stock or borrowing from a bank…

A: Bonds are considered a financial instrument used to raise finance for the organization. It is also…

Q: Which of the following statements about the characteristics of debt and equity is true? a. All of…

A: Introduction:- Equity:- Equity means company collection of funds in the form of shares. equity…

Q: Which of the following is a disadvantage to a corporation issuing bonds? Group of answer choices…

A: Disadvantages of issuing a bonds; (1) Since bonds are an increase in debt, they might adversely…

Q: Golden Gate Construction Associates, a real estate developer and building contractor in San…

A: Economic Value Added: In the financial world, economic value added (EVA) is a measure of a company's…

Q: Companies obtain their funds from two sources: debt and equity. The providers of these funds are…

A: A shareholder is a person who is the owner of a company and owns a certain percentage of the…

Q: the effects of increasing the amount paid upfront when corporations make capital purchases with a…

A: Capital expenditure is an expense, that generates profits for a longer period of time which can be…

Q: hich of the following statements best describes how a corporation determines its cost of capital?…

A: A capital structure of a firm is a mix of debt and equity used for financing its long term…

Q: Since bonds do not give up ownership in a corp, why not simply take all funding with bonds?   -  is…

A: 1. Bond is presented in the balance sheet of the company. It is a loan on which a fixed amount of…

Q: Which is not a benefit of debt to the corporation? a. interest payments are tax deductible b. when…

A: When debt is borrowed heavily,  it increases the burden of interest and principal repayment.  When…

Q: Companies, and governments can all borrow money using bonds. But only corporations have…

A: When companies or governments issue bonds, there is a fixed rate of return expected from the issued…

Q: Is there a type of stock preferable over the other? Should a corporation also utilize borrowing if…

A: Equity Stock represents the equity shares of a company. Equity shares are the part of company owned…

Q: What is the relative tax advantage of debt when corporate and personal taxes are considered?

A: “Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: What is the PRIMARY way a corporation can raise money through EQUITY financing?

A: Equity financing is referred as the fund raising for a company by selling its shares. The person who…