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Tatiana [17]
3 years ago
12

A corporation that uses both debt and equity in its capital structure has concluded that the risk premium it must pay on its com

mon stock is too high. To decrease​ this, the firm can
A) increase the proportion of long-term debt to decrease the cost of capital.
B) increase short-term debt to decrease the cost of capital.
C) decrease the proportion of common stock equity to decrease financial risk.
D) increase the proportion of common stock equity to decrease financial risk.
Business
1 answer:
lisabon 2012 [21]3 years ago
7 0

Answer:

A) increase the proportion of long-term debt to decrease the cost of capital.

Explanation:

<em>Weighted average cost of capital is the average cost of all the different types of long term finance used by a firm weighted according the market value of each type</em>.

<em>The cost of debt is cheaper than cost of equity because the interest payment on debt  are tax deductible</em><em>. That is interest costs help reduce te amount payable as tax.</em><em> According to the traditional theory of WACC, to a reasonable level, the more debt a company uses the lower the WACC.</em>

<em>Cost of equity is higher the cost of debt because the risk associated with holding shares from the perspective of the investors is higher because equity holders receive residual income after other claims have been settled. So they are real risk bearer. </em>

So to reduce the overall  cost of capital, the corporation should to increase the proportion of  long-term term

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3 years ago
Which of the following would likely be covered under homeowners insurance but NOT by renter's insurance?a. Your basement floods,
VladimirAG [237]

Answer:

C

Explanation:

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Renter’s insurance does not cover building or Structure on sites

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3 years ago
Quarry Corp. has the following costs related to a mine it acquired this year. Cost of land and natural resource rights $200,000
frozen [14]

Answer:

$375,000

Explanation:

The computation of the amount included in the natural resource is shown below:

= Cost of land & natural resource rights + cost of extraction during year + equipment used for mining + exploration & drilling cost

= $200,000 + $35,000 + $100,000 + $40,000

= $375,000

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8 0
3 years ago
8) walter co. and sandburg industries report the following information at december 31: walter sandburg accounts receivable $41,0
True [87]

Walter Co. is a manufacturer because it uses raw materials, and has a stock of merchandise inventory, work-in-progress inventory, and finished goods inventory. The current assets of Walter Co. will be:

Current Assets:

Cash                                                          6,000

Inventories

Raw materials inventory       21,000

Work in progress inventory  40,000

Finished goods inventory      25,000

Merchandise inventory           48,000

Total inventory                                      1,34,000

Other assets

Accounts receivable                               41,000

Prepaid expenses                                     1,000

Current assets                                                               2,22,000

A manufacturing company is a company that takes in raw materials processes the raw materials and then sells the finished goods manufactured in the market. So the current assets section of the balance sheet of Walter Co. is given which will be written on the right side of the balance sheet.

Learn more about manufacturing companies here:

brainly.com/question/14942185

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3 0
1 year ago
There are more than 20 stores on a street in Sao Paulo that specialize in selling the same quality and brand of wheat products.
Pani-rosa [81]

Answer:

Pure competition

Explanation:

Pure competition is a market structure characterized by many competitors selling similar products. Due to the high competition, market forces dertermine prices. Pure competition is also referred to as perfect competition. The other features of pure competition include.

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  2. There are barriers no entry and exit in the market
  3. Firms sell homogeneous products
  4. Firms cannot influence the market price. Firms are price takers.
  5. The units of production such are homogeneous and are freely moving.
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