Investment and financing decisions Read the following passage: “Companies usually buy (a) assets. These include both tangible assets such as (b) and intangible assets such as (c). To pay for these assets, they sell (d) assets such as (e). The decision about which assets to buy is usually termed the (f) or (g) decision. The decision about how to raise the money is usually termed the (h) decision.”
Now fit each of the following terms into the most appropriate space: financing, real, bonds, investment, executive airplanes, financial, capital budgeting, brand names.
To determine: The ways the following terms fit into the given appropriate spaces.
Explanation of Solution
The ways the following terms fit into the given appropriate spaces are as follows:
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Chapter 1 Solutions
Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
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- As part of his duties, if a finance manager of a company is working on the appropriate source of finance and estimating cost of capital with appropriate debt-equity combination of the company for an expansion proposal, which of the following function he is working on? Select one: A. Forecasting Financial Requirement B. Cash Management C. Acquiring Necessary Capital D. Investment Decisionarrow_forwardchoose the coreect answer 1-Aconservative financing policy indicates that investment in fixed and current assets is funded by long-term sources of financing and this policy leads to a-Low risk of real and financial hardship – b-Low interest rates and apayment premium borne by the company 2- The payback period method in evaluating projects depends on extracting the time period required to cover the investment amount under this method a-we tuke only cashflows to cover the investment size b-we talk cash flows to cover with cash flows expected to be collected after the payback period 3- suppose you have a stock and this stock achieves a loss in half of the period of 20% and makes a profit in the other half of the period of 70% and therefore the expected rate of return per share will ER =25% ER=50% ER=65%arrow_forwardIn the aggressive approach to current asset financing, a. fixed assets and permanent current assets of a firm are financed with short-term nonspontaneous sources of funds b.all of the fixed assets and permanent current assets are financed with long-term sources of funds c.fixed assets of a firm are financed with long-term capital, but some of the firm's permanent current assets are financed with short-term sources of funds. d.fixed assets of a firm are financed with short-term nonspontaneous sources of funds, but some of the firm's permanent current assets are financed with long-term capitalarrow_forward
- Calculate the terminal cash flow of the project Taking into consideration all the information given, determine the Net Present Value of the project and advice the company on whether to invest in the new line of product. Why should the cost of capital used in capital budgeting be calculated as a weighted average of the capital component rather than the cost of the specific financing used to fund a particular project?arrow_forwardInvestment in Real Estate is a longterm investment which affect the cash flows position of the entity either positively or negatively. Required a). Discuss the above statement in the context of Real Estate Investment b). How can a Real Estate owner make provisions for value decline in the asset and what causes value decline c). Suppose the price of a house in year zero now is $5 million and the price of the house in one year's time will be $5.6 million. Calculate the expected rate of appreciation in the price of the housearrow_forwardDefining capital investments and the capital budgeting process Match each definition with its capital budgeting method. Methods Accounting rate of return Internal rate of return Net present value Payback Definitions It is only concerned with the time it takes to get cash outflows returned. It considers operating income but not the time value of money in its analyses. Compares the present value of cash outflows to the present value of cash inflows to determine investment worthiness. The true rate of return an investment earns.arrow_forward
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