Financing options in terms of projected return

Assignment Help Business Management
Reference no: EM131094081

Carter Dalton is well on his way to starting a new venture-- Max, Inc. He has projected a need for $350,000 in initial capital. He plans to invest $150,000 himself and either borrow the additional $200,000 or find a partner who will buy stock in the company. If Dalton borrows the money, the interest rate will be 6 percent. If, on the other hand, another equity investor is found, he expects to have to give up 60 percent of the company's stock. Dalton has forcasted earnings of about 16 percent of operating income on the firm's total assets.

Question 1: Compare the two financing options in terms of projected return on the owner's equity investment. Ignore any effect from income taxes.

Question 2: What if Dalton is wrong and the company earns only 4 percent in operating income on total assets?

Question 3: What should Dalton consider in choosing a source of financing?

Reference no: EM131094081

Questions Cloud

Include the factors of decision making : The literature and popular press suggest that the new perspective of leadership is to put aside the need for immediate ego gratification and find fulfillment in the accomplishments of those on the team.
List all costs you can identify with the separate activities : Describe all business activities from the time a customer arrives to the time that customer departs. List all costs you can identify with the separate activities described in part 1.
What type of fraud is regina committing : Regina has finally landed her dream job at Abercroanie & Fetch. After just a couple of days on the job, we find out why. What type of fraud is Regina committing? How could her employer detect this kind of fraud?
What is the company cost of equity capital : Skillet Industries has a debt-equity ratio of 1.3. Its WACC is 8.6 percent, and its cost of debt is 7.4 percent. The corporate tax rate is 35 percent. a. What is the company's cost of equity capital? (Round your answer to 2 decimal places. (e.g., 3..
Financing options in terms of projected return : Question 1: Compare the two financing options in terms of projected return on the owner's equity investment. Ignore any effect from income taxes. Question 2: What if Dalton is wrong and the company earns only 4 percent in operating income on total ..
Effective interest rates in regard to finance : What is the difference between the actual and effective interest rates in regard to finance.
About the problem of hunger and malnutrition : As Christians, what can we do and/or what should we do about the problem of hunger and malnutrition?
Briefly summarize michael eric dysons opinion : Briefly summarize Michael Eric Dyson's opinion of Imus' statements - Explain Dr. Dyson's reasoning for connecting the Don Imus incident to Black women and rap/Hip Hop music. Do you think this is a logical connection? Why/Why not?
Influence international bond valuation : Discuss the influences in international bond valuation. Discuss the factors that influence international bond valuation. Find a recent article that discusses investing in international bonds.

Reviews

Write a Review

Business Management Questions & Answers

  A plan of action of surveying customers

What value does surveying customers bring?

  Find notable artists and works

Prepare a paper in which you identify a minimum of five notable artists (and their works) that helped define the 20th century.

  Determine if there is a important market for its merchandise

Determine if there is a important market for its merchandise in a specific mall location where it is considering opening a store

  Production function exhibiting diminishing returns

In a production function exhibiting diminishing returns to scale everywhere, the marginal cost of the short run will never intersect with the marginal costsof the long run. True or false, explain.

  Decision making and global competition and cultures

Explain what is the influence of global competition and culture on managerial decisions in changing environments?

  What does it mean to you on a personal level

How could you apply what you have learned about writing to your workplace? If you are not presently working, project this question towards your future career.

  Explain argue why these concepts are relevant

Explain Argue why these concepts are relevant and how the application of these concepts could impact the future strategy of UBS.

  Period for the illness affecting eleven blue men

1. Draw a timeline marking the time each of the 11 blue men presented symptoms. Explain the point of mapping out the incident timeframe (i.e. why would epidemiologists need this information and how would it be used) 2. Describe the key symptoms an..

  Collaboration and conflict resolution

Examine an instance when you were in a meeting where an agenda was not used. What was the end result of the meeting's proceedings?

  Explain conflict resolution and team conflict

Show how you would know that your team was in conflict and what would be a technique you would use to resolve it.

  Evaluate to perspective of two normative ethical theories

Evaluate the topic from the perspective of two normative ethical theories that were taught on the module (see attachment) and justify why they are relevant for the topic.

  Hybrid improvised models of management hybrid improvised

hybrid improvised models of management why is it important for organizations in india to search for hybrid improvised

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