Debt in any form worsens the financial position of the company as it is money that the company does not really have and will eventually have to be repaid. if self financing is the same as introducing capital then this would improve the financial standing of the company as this money does not have to be repaid but is the company's to use
Answer:
70.1754386
Explanation:
The calculation of the number of the futures contract to sell as follows:
Portfolio value $1,000,000
Face value $100
Units. $10,000
Maturity portfolio. 5
Modified duration. 4
Modified duration of T bonds 9
Yield on portfolio. 0.000015
Yield on T bonds. 0.00001
Future price of the bonds $95
Loss of portfolio. $60
Decline in fut T bond price $.0086
Per value contract. $86
Number of future contract to sold 70.1754386
Answer:
C) RE = D1/P0 + g
Explanation:
The formula above is the cost of retained earnings or the cost of equity.
The first portion of the formula (D1/P0) is known as dividend yield which is simply dividend divided by price.
The second part(g) is known as the growth rate of dividends.
The initial formula is rearranged thus:
P0=D1/(RE – g)
P0*(RE – g)=D1
RE – g=D1/P0
RE=D1/P0+g
Answer:
c. $504,000
Explanation:
Total cost of new equipment = Price of equipment + Shipping & Installation costs = $3,200,000 + $160,000 = $3,360,000
Increase in working capital = Increase in inventories & account receivables - Increase in accounts payable = $640,000 - $256,000 = $384,000
Total Initial net investment outlay = $3,744,000 ($3,360,000+$384,000)
Project terminal cash-flow = Sale value of equipment (after tax) + Recovery of working capital = $200,000*(1-0.40) + $384,000 = $120,000 + $384,000 = $504,000