+1-415-670-9189
info@expertsmind.com
Several factors affect firms need for external funds
Course:- Financial Management
Reference No.:- EM13891896




Assignment Help
Assignment Help >> Financial Management

Several factors affect a firm’s need for external funds. Evaluate the effect of each following factor and place a check next to each factor that is likely to increase a firm’s need for external capital—that is, its AFN (additional funds needed). Check all that apply.

a) The firm decreases its retention ratio.

b) The firm previously thought its fixed assets were being operated at full capacity, but now it learns that it actually has excess capacity.

c) The firm switches its supplier for the majority of its raw materials. The new supplier offers less favorable credit terms and thus reduces the trade credit available to the firm, resulting in a reduction in accounts payable.

Dividends to common shareholders are paid out of after-tax earnings. Do these payouts affect a firm’s AFN?

a) Yes, dividends still affect a firm’s AFN even though they are paid out of after-tax earnings.

b) No, dividends do not affect a firm’s AFN, because they are paid out of after-tax earnings.




Put your comment
 
Minimize


Ask Question & Get Answers from Experts
Browse some more (Financial Management) Materials
His recently departed dear Aunt Annie, may she rest in peace, has left Tom a 6-year annuity paying $4,500 per year. He will receive the first payment 4 years from today. If he
Harrison Corporation is interested in acquiring Van Buren Corporation. Assume that the risk-free rate of interest is 5% and the market risk premium is 5%. Van Buren currently
Down Under Boomerang, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2.58 million. The fixed asset will be depreci
What will $5,000 invested for 10 years at 8 percent compounded annually grow to? How many years will it take $400 to grow to $1,671 if it is invested at 10 percent compounded
Assume annual compounding of interest for these problems. Assume 10% annual interest rate volatility. Calculate the binomial interest rate tree using the 2-year on-the-run iss
Suppose to companies have the exact same balance sheets (i.e. – their book values are the same). Which of the following would not be a reason for one company to have a higher
Tampa Manufacturing, an established producer of printing equipment, expects its sales to remain flat for the next 3 to 5 years because of both a weak economic outlook and an e
The Snatch Company has outstanding bonds with a coupon rate of 7.75% and semi-annual payments. The bonds are redeemable on June 30, 2035. If Bobby can earn 5.5% on comparable