Calculate the annual value of an interest tax

Reference no: EM133258865

Assignment - Finance Question

Q-1. List four protective covenants that you might be interested in as a prospective bondholder. Briefly describe why these would be realistic bondholder concerns. How would a convertible bondholder decide whether to exercise his rights of exchange? (Words- 300 to 400)

Q-2. How do venture capital firms design successful deals? Why it is likely that venture capital is disbursed in installments, rather than issuing all necessary funds at once? (Words- 300 to 400)

Q-3. (A) Calculate the annual value of an interest tax shield under the assumption that a firm maintains debt at a permanent $1,000,000 level and rate of 12%. The corporate tax rate is 35%. If there is no chance of financial distress, how does the value of the firm change as a result of this debt?

(B) How are dividends paid and how do companies decide on dividend payments? Discuss the concept of dividend signaling. (Words- 250 to 350)

Q-4. Discuss how agency problems can develop between shareholders and bondholders when the firm is experiencing financial distress. Is there a rule for finding optimal capital structure? (Words- 300 to 400)

Note. To improve your answers, you are requested to use at least 5 recent scientific references.

How do firms develop a short-term financing plan that meets their need for cash? (100 Words)

Reference no: EM133258865

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