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vova2212 [387]
1 year ago
9

Are the costs of debt and equity observable in the capital markets? If not, how do you estimate that cost of capital?

Business
1 answer:
Levart [38]1 year ago
3 0

Depending on the supply and demand of equity, a bond’s price can vary, thus the premium or discount price.

For example, when the interest rate falls, older bonds may become valuable because they were sold in a higher interest rate environment and therefore with a higher coupon rate. Consequently, investors holding those bonds can commend a "premium" to sell equity. On the other hand, if the interest rate rises, older bonds may become less valuable. In order to get rid of them, investors may have to sell for less, thus the "discount” price.

Bond prices are quoted as a percent of the bond’s face value, and an easy way to learn the price of a bond is simply by adding a zero to the price quoted. For instance, when you hear a bond is quoted at 99, it means the price for the bond is $990 for every $1,000 of face value. Because the bond price is below the face value, it’s said the bond is traded at a discount. On the other hand, if the bond is trading at 101, it means you will pay $1,010 to get that $1,000 face value bond.

The dividend discount model (DDM) is a procedure for valuing the price of a stock by using the predicted dividends and discounting them back to the present value. If the value obtained from the DDM is higher than what the shares are currently trading at, then the stock is undervalued.

Learn more about   equity here

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scoray [572]

If a company has a high level of relation coordination then the expected employee behavior is good as well. The employees respond to the company is highly satisfactory

6 0
3 years ago
Mark the three choices that are true of a living trust.
AlekseyPX
<span>When the minor children reach a certain age, the living trust is always discontinued: FALSE
A living trust is established while the owner of the property or money put in trust is still alive.TRUE
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7 0
2 years ago
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6. Bronco Co. is a U.S.-based MNC that has subsidiaries in Spain and Germany. Both subsidiaries frequently remit their earnings
Hatshy [7]

Answer:

Cash outflow of $579,500

Explanation:

Net cash flow is the sum of all cash inflow and outflows of the company.

In this question the company has cash outflow from Spain and inflow from Germany.

As per given data

Cash flow from Spain subsidiary = €5,000,000 outflow

Cash flow from German subsidiary = €4,500,000 inflow

Net cash flow to parent company = - €5,000,000 + €4,500,000

Net cash flow to parent company = - €500,000

The currency is converted using the exchange rate of $1.159 per euro.

Net cash Flow in U.S. dollars = - €500,000 x  $1.159 per euro

Net cash Flow in U.S. dollars = - $579,500

3 0
3 years ago
Requesting funds for working capital suggests that the business is not a solid investment
Minchanka [31]
If i am understanding the question correctly it is false.....but i am a week late soo either way i guess it doesnt matter xD
7 0
2 years ago
Read 2 more answers
Cybernet Systems is a​ start-up company that makes connectors for​ high-speed Internet connections. The company has budgeted
Sophie [7]

Answer:

$10,950 Unfavorable

Explanation:

For computation of flexible budget variance for total costs first we need to find out the standard cost which is shown below:-

Standard cost = (Sold connectors × budgeted variable costs) + Fixed costs per month

= (77 × $150) + $5,500

= $11,550 + $5,500

= $17,050

Flexible budget variance for total costs = Actual cost - Standard cost

= $28,000 - $17,050

= $10,950 Unfavorable

8 0
3 years ago
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