+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
You are considering adding a new software title to those published by your highly successful software company. If you add the new product, it will use capacity on your disk du
Moffett Machinery has 20 million shares of outstanding common stock, each with a market price of $18/share. The remainder of the firm's capital structure consists of $600 mill
You have arranged for a loan on your new home that will require the first payment today. the loan is for $195,000, and the monthly payments are $1120. What is the timeline? wh
Consider an asset that costs $684,600 and is depreciated straight-line to zero over its seven-year tax life. The asset is to be used in a four-year project; at the end of the
You own a portfolio equally invested in a risk free asset and two stocks. If one of the stocks has a be the beta of .5, and the total portfolio is half as risky as the market,
The Yubaba Company has so far not paid a dividend on its stock. Investors believe that the Company won’t pay a dividend next year, but that it will pay dividends starting two
Suppose Pale Hose, Inc. has just paid a dividend of $1.50 per share. Sales and profits for Pale Hose are expected to grow at a rate of 7% per year. Its dividend is expected to
Based on the information below, calculate the weighted average cost of capital -Two thousand shares of preferred are outstanding, each of which pays an annual dividend of $7.