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Should a firm hedge? Why or why not?
Answer: Firms may not need to hedge exchange risk in a perfect capital market. But firms can add to their value by hedging if markets are not perfect. First, if management identify about the firm’s exposure better than shareholders, the company, not its shareholders, should hedge. Second, firms may be capable to hedge at a lower cost. Third, if default costs are important, corporate hedging can be justifiable because it decreases the probability of default. Fourth, if the firm faces progressive taxes, it can decrease tax obligations by hedging which stabilizes corporate earnings.
Explain the terminal value calculation at the end of the forecast period. Why is it necessary? The organization whose business operation is being valued is not supposed to sudde
An investor receives periodic interest payments at specified intervals till the date of holding or maturity. However, the holder of zero coupon
Putable bonds can be redeemed prior to maturity at the initiative of the bondholder. These bonds are more advantageous to the investors as they get an opportunity to re
Categorization of management risk: Once each event has been evaluated, and been classified as to its probability and impact, the next step is to categorise those events. To do
Q. What is Current Asset? Current Asset - ASSET which one can reasonably expect to convert into cash, sell or consume in operations within a single operating cycle or within a
Financial Leverage In accounting and finance, the amount of long lasting debt that an organization has in relation to its equity the longer the ratio, the larger the lever
Develop and implement strategic plan using bounce fitness as case study
Q. Benefits of the proposed policy change? Short-term sources of debt finance comprise overdrafts and short-term loans. An overdraft offers elasticity but since it is technical
Assignment II Describe capital budgeting techniques with formulas and examples.
a. The primary financial objective of a company is the maximization of the wealth of shareholders ...per corporate finance theory. Though, this objective is usually replaced by
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