Cost of new outside equity capital

Assignment Help Financial Management
Reference no: EM13813360

The cost of retained earnings is less than the cost of new outside equity capital. Consequently, it is totally irrational for a firm to sell a new issue of stock and to pay cash dividends during the same year. Discuss the meaning of those statements.

Reference no: EM13813360

Questions Cloud

Profit change associated with sales changes : Changes in sales cause changes in profits. Would the profit change associated with sales changes be larger or smaller if a firm increased its operating leverage? Explain your answer.
Capital structure for financing the expansion : A firm is about to double its assets to serve its rapidly growing market. It must choose between a highly automated production process and a less automated one. It also must choose a capital structure for financing the expansion.
Totally irrational for a firm to sell a new issue of stock : The cost of retained earnings is less than the cost of new outside equity capital. Consequently, it is totally irrational for a firm to sell a new issue of stock and to pay cash dividends during the same year. Discuss the meaning of those statements.
Changes in sales cause changes in profits : Changes in sales cause changes in profits. Would the profit change associated with sales changes be larger or smaller if a firm increased its operating leverages?  Should the asset investment and financing decisions be jointly determined, or should e..
Cost of new outside equity capital : The cost of retained earnings is less than the cost of new outside equity capital. Consequently, it is totally irrational for a firm to sell a new issue of stock and to pay cash dividends during the same year. Discuss the meaning of those statements.
Explain what a residual dividend policy implies : One position expressed in the financial literature is that firms set their dividends as a residual after using income to support new investment. Explain what a residual dividend policy implies, illustrating your answer with a table showing how differ..
Explain the current state of victims'' rights in america : What is your personal stance on the current state of victims' rights in America
Why method of electing the president changed : Explain why do you think the method of electing the president and Vice President changed
How different developed would indeed become irreconcilable : Write an essay in which you explain how these differences developed, would indeed become irreconcilable, and were only resolved in what is still the bloodiest war the USA has ever engaged in up to now, The Civil War.

Reviews

Write a Review

Financial Management Questions & Answers

  Line of credit to fill temporary cash shortfalls

Which of the following financial ratios/percentages would be the most likely reason for a bank to NOT approve a company’s application for a line of credit to fill temporary cash shortfalls?

  Expected to result in after-tax cash flows

A company has an opportunity to invest in a project that is expected to result in after-tax cash flows of $18,000 the first year, $20,000 the second year, $23,000 the third year, -$8,000 the fourth year, $30,000 the fifth year, $36,000 the sixth year..

  Define moderately strenuous job responsibilities

If I purchase a policy that pays a fixed benefit of 90% of my current salary, how long will it be before this amount covers only 70% of my future salary if I assume salary increases of 4% per year?

  Whats the bonds current yield and capital gain yield

Analyze the 20-year, 8% coupon rate (annual payment), $1,000 par value bond. The bond currently sells for $1,318. What’s the bond’s current yield, and capital gain yield?_________

  Identify the federal income tax issues that pete faces

Orange Inc, a calendar year corporation in Clemson, South Carolina, elects S corporation status for 2014. The company generated a $74,000 NOL in 2013 and another NOL of $43,000 in 2014. Orange recorded no other transactions for the year.

  Decrease the interest rate sensitivity of a bond

Which of the following combinations is assured to decrease the interest rate sensitivity of a bond?

  What is the average accounts receivable balance

On average, your firm sells $25,800 of items on credit each day. The firm's average operating cycle is 35 days and it acquires and sells inventory, on average, every 18 days. What is the average accounts receivable balance? A firm sells 14,200 units ..

  What proportion of a firm is debt financed

What proportion of a firm is debt financed if the WACC is 12%, the return on debt is 6%, the tax rate is 40% and the required return on equity is 18%?

  Assume the risk free inflation adjusted interest rate

You have a contract that entitles you to receive $1 million 20 years from now. But can't wait and want your money now. You want to sell your contract. What is a fair price for it? Assume the risk free, inflation adjusted interest rate is 3% per year,..

  Provide a swot analysis of netflix from 2011 and consider

netflix swot analysis project1.please read all you can find on netflix from the time of the 2011 debacle over quikster

  Find the future values of the ordinary annuities

Find the future values of the following ordinary annuities:

  Demonstrat ing the potential risk from financing

Discuss the pros and cons of financing in unhedged Eurodollars instead of via Euroeuros. As you do this you must give consideration to the foreign exchange risks associated with financing in Eurodollars.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd