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Interest rates fluctuate in the economy over various cycles. When interest rates are low, organizations may decide to issue debt as the cost of debt is low. However, this is likely to happen only with financially strong organizations because interest rates tend to be lower during recessions. An organization that has poor cash flow prospects, limited fixed assets, or both, is unlikely to issue debt. This organization is more likely to issue equity, if it is able to find investors interested in buying the stock. Some organizations choose to have debt in their capital structures whereas others choose not to. What are the advantages and disadvantages of employing debt in an organization's capital structure? Justify your answer using examples and reasoning. Comment on the postings of at least two peers and indicate whether you agree or disagree with their views.
The firm has a tax rate of 30 percent, an opportunity cost of capital of 0 percent, and it expects net working capital to increase by $93,000.00 at the beginning of the project.
Computation of return on investment and A company has calculated the following ratios for one of its investment centres
Mr. Smith is in the 30 percent tax bracket. He earns $50,000 per year. Determine the rate for Good Neighborcare bond that would give Mr. Smith the same after tax return as Megacorp bond?
Determine Maximum price for the investment.
Mike Polanski is 30 years of age and his salary next year will be $40,000. If the discount rate is 8 percent, what is the PV of these future salary payments?
Suppose you were given an opportunity to own a business of your choosing. First, briefly describe your business; then explain the most efficient way to raise capital to either start or expand your business. Provide support for your response.
What is the net present value (NPV) of this decision if the cost of capital is 9%?
You are planning to make monthly deposits of $450 into a retirement account that pays 8 percent interest compounded monthly. If your first deposit will be made one month from now, how large will your retirement account be in 25 years?
You own a portfolio equally invested in a risk-free asset and two stocks. One of the stocks has a beta of 1.9 and the total portfolio is equally as risky as the market. What is the beta of the second stock?
Its common equity trades at 53$ per share, and the firm has 6.4 million shares outstanding. What weights should MV Corporation use in its WACC?
How much will each annual payment be? What ratios would be impacted by extra debt? How would you give explanation for this purchase to management?
Suppose that Ken-Z Art Gallery has annual sales of $884,000, cost of goods sold of $574,000, average inventories of $160,000, average accounts receivable of $129,000, and an average accounts payable balance of $86,000.
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