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Common stock financing is often considered the safest form of financing, as the issuing firm is under no obligation to pay dividends. Owners of common shares assume this uncertainty in the hope of favourable returns. Debt financing, assuming reasonable debt levels and good credit, is often the least expensive form of capital. This is because owners of bonds have legally enforceable claim on company assets, and thus require a lower rate of return. Plus, interest payments are tax deductible.
Then we have preferred stock financing. Owners of preferred stock do not enjoy the same upside as common shareholders. Preferred shareholders claims on company assets are below the claims of creditors. As a result, owners of preferred shares demand higher rates of return than bondholders. Plus, the firm does not get to write off the dividends paid to preferred share holders, making the after tax cost of preferred shares even more expensive relative to bonds. Yet large corporations issue preferred shares all the time. In your opinion, why is this? What is the argument for issuing preferred shares? Why not create a capital structure made solely of bonds and common stock?
what do you mean by financial index and commodity index?method of index uses in calculation?weighted average method?how
Prepare a schedule the intangible section of Lewiss balance sheet at December 31, 2011. Show supporting computations in good form.
Bond X is no callable and has 20 years to maturity, a 11% annual coupon, and a $1,000 par value. Your required return on Bond X is 9%; and if you buy it, you plan to hold it for 5 years. You (and the market) have expectations that in 5, years the yie..
Explore the need for organisations to calculate and manage performance against objectives, as well as the potential effectiveness of tools such as Balanced Scorecards and Strategy Maps as aids in this cause.
If the appropriate interest rate is 8.16 percent, what is the future value of these investment cash flows six years from today?
1.briefly describe venture debt capital and venture equity capital.2.describe how the costs of debt and equity differ
Using the capitalized earnings method (EPS/RS), compute the estimated share values associated with each of the capital structures. Select the optimal capital structure on the basis of: Maximization of expected earnings per share.
What is the beta of your portfolio
Hardin-Gehr Corporation (HGC) began operations 5 years ago as a small firm serving customers in the Detroit area. However, its reputation and market area grew quickly. Today HGC has customers all over the United States. Despite its broad customer bas..
A project has an initial cost of $925, expected net cash inflows of $690.30 per year for 4 years, and a cost of capital of 11.10%. What is the project's discounted payback period?
The Spartan Co. has an unlevered cost of capital of 11%, a cost of debt of 8%, and a tax rate of 35%. What is the target debt-equity ratio if the targeted cost of equity is 12%?
the metropolis health system managers are also working on their budgets for next year. each manager must annualize his or her staffing plan, and thus must convert staff net paid days worked to a factor.
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