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a. What is capital structure? How does it reflect riskiness of a company?
b. Why is the use of long-term debt in the capital structure referred to as using financial leverage?
c. What is the fundamental principle of financial leverage? When does financial leverage work positively and when does it work negatively?
d. A company's capital structure consists of $50 million in shares with a required return of 15% and $40 million in bonds with a required return of 9%. Assume that the company could issue $10 million in additional bonds and use the proceeds to buy back $10 million worth of equity. What would happen to the company's WACC? What would happen to the required rate of return on the company's shares?
Describe the two approaches. Which you think one approach is more favorable (or just) than the other? Why?
aj pharmaceuticals would like to issue 20-year bonds to obtain the remaining funds for the new mexico plant. the
Company planning of project up front paid today at t = o .The project will generate positive cash flow of $60,000 for the next 5years.The project NPV is $75,000 and company WACC is 10 percent.
A stock has an expected return of 0.10 and a variance of 0.24. What is Its coefficient of variation?
Assume that the investment was originally classified as trading securities and then changed to available-for-sale on December 31, 2012. Provide the journal entries recorded at October 18, 2011; December 31, 2011; and December 31, 2012.
Risk free arbitrage is important to all areas of finance and particularly capital budgeting? Most activities in reality that are called "arbitrage".
Some have predicted that technological progress will make many people unemployed, while others have suggested
Write a report responding to the tasks assigned to your team. Clearly organize your report and effectively communicate the team's analysis, conclusions and recommendations (if appropriate) associated with each task. Provide the details supporting ..
The opportunity cost of capital is 10.3 percent. Calculate the NPV of each choice and suggest when should Predator sell the company?
?In this project, you will create a professional presence on LinkedIn (a professional social media network that is widely used by professionals and employers
Identify the weaknesses of the payback period method.
Choose a hotel to research on the Internet. What ideas would you implement to improve the sustainability of that hotel?
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