Risk is the major factor to consider when deciding the funding, when funds are provided it is a risk that whether the funds will be received or not.
<h3>What is Risk?</h3>
Risk is the threat of being unable to receive the funds back, this is the highest level of risk, there are many small risks too, but the highest level is losing the money.
There could be a small portion of loss of money or sometimes the debtor completely defaults so not a single penny is retrieved.
Funding is a choice and the debtor should be chose according to the risk appetite of the investor or lender on money.
There are investors who are risk averse are not willing to take the risk and fine with the less amount of returns and there are risk takers, who want high returns in return of high risk of defaulting.
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Answer:
A. Decrease
Explanation:
In investment appraisal with the method of Net Present Value, the bone of contention and the central matter is the TIME VALUE OF MONEY.
In the above scenario, the initial working capital was 100% released in proportions of 40%, 40% and 20%, throughout the 3 years of the project. However, if the reverse had been the case, i.e. parting with more cash now and the requirement of working capital now becomes: Year 0 = -10,000, Year 1 = - 10,000, Year 2 = -10,000, Year 3 = +30,000; the NPV would definitely shrink because the value of 10,000 each in Years 0-2 would not be the same when it is recovered from the project in year 3. The value will be smaller and hence the NPV of the project would have decreased as a result of the time value of money.
<u>This is an example of "outsourcing".</u>
Outsourcing is the business routine with regards to procuring a gathering outside an organization to perform benefits and make products that generally were performed in-house by the organization's own representatives and staff. Generally done as a cost-cutting measure, it can influence occupations going from client support to assembling to the back office.
Outsourcing can enable organizations to lessen work costs essentially by outsourcing certain assignments. Organizations can likewise dodge costs related with overhead, gear and innovation.
Answer:
Current Yield = 0.05882 or 5.882% rounded off to 5.88%
Explanation:
A current yield refers to the annual return that a security provides based on the interest or dividend payments it makes expressed as a percentage of it current price. Thus, the current yield on preferred stock can be calculated as follow,
Current Yield - Preferred stock = Dividend per year / Current price
Dividend per year = 100 * 0.06 = $6 per year
Current Yield = 6 / 102
Current Yield = 0.05882 or 5.882% rounded off to 5.88%
Answer:
The correct answer is letter "E": How much cash should the firm keep in reserve?
Explanation:
Working capital decisions imply working in capital cycles. They take into consideration interest rates, debtors management, and the company's financing in the short run. The working capital decisions also ensure that the organizations have enough cash to pay its bills and determine how much of the cash flow should be stored in the firm's reserve.
