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N76 [4]
3 years ago
7

Which financing option has the highest overall costs?

Business
2 answers:
Anvisha [2.4K]3 years ago
7 0

Answer:

A. rent to own

Explanation:

katrin2010 [14]3 years ago
4 0

<u>Equity financing has the highest overall cost. </u>

Further Explanation:

The financing options that are available to the company are equity and debt. Equity  Financing refers to the issue of equity shares to the public. Debt refers to the loan taken by the company from the public or any financial institutions. The equity shareholders have the right to vote in general meetings while the debt holder does not have any such rights.

The equity shareholders are also entitled to receive dividends while debt holders are entitled to receive the interest regardless of whether the company is having a profit or not. The interest paid to debt-holders is deducted from the net profit before any tax is charged. The interest reduces the taxable income while the dividend is calculated on net profit after tax. Thus, the cost of using debt finance is lower as the amount which is paid as the interest is charged against the tax.

<u>Therefore, Equity financing involves a higher cost than Debt financing. </u>

Learn more:

1. Learn more about raising the equity

brainly.com/question/7854996

2. Learn more about the problem related to equity theory

brainly.com/question/3771927

3. Learn more about the short-term financial goals

brainly.com/question/2451748

Answer details:

Grade: Senior School

Subject: Financial Management  

Chapter: Cost of Capital

Keywords: Equity financing, the highest overall cost, debt financing, financing options, capital, business, shareholder’s fund, loan, financial management, raise, issue.

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$1,621,000 and will produce $307,000 per year in years 5 through 15 and $570,000 per year in years 16 through 25. The U.S. gold
Georgia [21]

Answer:

The Australian mine : NPV = $125,865.68

For US MINE: NPV = $117,922.09

Explanation:

The question appears incomplete. Here is the full question:

Highland Mining and Minerals Co. is considering the purchase of two gold mines. Only one investment will be made. The Australian gold mine will cost $1,621,000 and will produce $307,000 per year in years 5 through 15 and $570,000 per year in years 16 through 25. The U.S. gold mine will cost $2,086,000 and will produce $281,000 per year for the next 25 years. The cost of capital is 12 percent. Use Appendix D for an approximate answer but calculate your final answers using the formula and financial calculator methods. (Note: In looking up present value factors for this problem, you need to work with the concept of a deferred annuity for the Australian mine. The returns in years 5 through 15 actually represent 11 years; the returns in years 16 through 25 represent 10 years.)

Calculate the net present value for each project

The Net present value is the present value of after tax cash flows from an investment less the amount invested.

NPV can be calculated using a financial calculator.

For The Australian mine,

Cash flow in year 0 = $1,621,000

Cash flow each year from year 5 to 15 = $307,000

Cash flow each year from year 16 to 25 = $570,000

I = 12%

NPV = $125,865.68

For the US mine ,

Cash flow in year zero = $-2,086,000 

Cash flow each year from year one to twenty five =  $281,000

I = 12%

NPV = $117,922.09

To find the NPV using a financial calacutor:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. After inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.

3. Press compute

I hope my answer helps you

6 0
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A liquidated debt is an obligation the existence or amount of which is in dispute. Group of answer choices True False
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Answer:

Answer: False

Explanation:

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The company can manufacture either two food processors per machine hour or three espresso machines per machine hour. The​ compan
tekilochka [14]

Answer:

The contribution margin per machine hour is $150.

Explanation:

Note: The missing part of the question is

                  Food Processor Espresso Machines

Sales price           $125                 $225  

Variable costs      $50                  $150

Solution

Contribution Margin per Machine = Sales Price - Variable Cost

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Contribution Margin =   Contribution per Machine ×  Number of Machines Produced in 1 Machine Hour

=  $75 * 2

= $150

​Thus, the contribution margin per machine hour for food​ processors is $150.

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