Answer:
The Correct Answer is C.
the trade-off theory posits that a firm would reach it's optimal capital structure if the tax savings from additional borrowing results in lower financial distress costs.
Explanation:
The combination of debt and equity used by a company to finance its operations and growth is referred to as it's <em>capital structure</em>. Debt comes in the form of bond issues or loans, while equity may come in the form of common stock, preferred stock, or retained earnings.
A company capital structure is affected by cost of capital. The higher the cost of borrowing the less the present value of the firm’s future cash flows, discounted by the Weighted Average Cost of Capital (WACC) and vice versa.
The weighted average cost of capital (WACC) is arrived at by calculating a firm's cost of capital in which each category of capital and proportionately weighing them. Categories of capital include including common stock, preferred stock, bonds, and any other long-term debt, are included in a WACC calculation.
Thus, the primary objective of the office of the finance manager should be to find the optimal capital structure that will result in the lowest WACC and the maximum value of the company (shareholder wealth).
Why?
The <em><u>optimal capital structure</u></em> is estimated by calculating the mix of debt and equity that minimizes the weighted average cost of capital (WACC) of a company while maximizing its market value.
Thus when additional borrowing results in lower financial distress costs, the firm achieves the potential to reach it's Optimal Capital Structure.
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Answer:
Growth rate 2.4%
Explanation:
MV=D1/(Ke-g)
Where MV=share market value=$15
D1=Dividend at year end=$.72
Ke=stock's expected rate of return=7.2%
By putting above values in formula, we get;
MV=D1/(Ke-g)
15=.72/(7.2%-g)
15*7.2%-15g=.72
1.08-15g=.72
.72-1.08=-15g
g= -.36/-15
g=2.4%
Answer:
preferred dividends = $30380
Common stock = $ 335620
Explanation:
Dividends 366000
preferred 7% * 217000= $15190 *2 years = $30 380
common stock = $335620
The total dividend declared is 366000 and preferred is 15190 per year but it is cumulative so we add the year that was in arrears so to get total dividend for preferred stock then we deduct the preferred from total dividend declared to get common stock's dividend.
Answer:
Science, Technology and Society (STS) is an interdisciplinary field that studies the conditions under which the production, distribution and utilization of scientific knowledge and technological systems occur; the consequences of these activities upon different groups of people.
Explanation:
Answer:
B) Objectives 2 and 3
Explanation:
Accounting controls are procedures that help a company ensure the validity and accuracy of its financial statements.
Therefore, one of the main priorities of accounting controls would be to make sure that accounting records are correct. By ensuring the validity of accounting records, the company's assets are safeguarded, since the possibility of something missing or being incorrectly recorded diminishes.
