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Elanso [62]
3 years ago
8

;-; What does this mean ;-;

Business
2 answers:
Scorpion4ik [409]3 years ago
5 0
What does anything mean⇔
shutvik [7]3 years ago
4 0
Why is like a school question

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A firm that purchases electricity from the local utility for $200,000 per year is considering installing a steam generator at a
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A capital budgeting project is usually evaluated on its own merits. That is, capital budgeting decisions are treated separately
salantis [7]

Answer: D

Explanation: A capital budgeting project is usually evaluated on its own merits. That is, capital budgeting decisions are treated separately from capital structure decisions. In reality, these decisions may be highly interwoven. This interweaving is most apt to result in firms accepting some negative NPV all-equity projects because changing the capital structure adds enough positive leverage tax shield value to create a positive NPV.An optimal capital structure is the objectively best mix of debt, preferred stock, and common stock that maximizes a company’s market value while minimizing its cost of capital.

In theory, debt financing offers the lowest cost of capital due to its tax deductibility. However, too much debt increases the financial risk to shareholders and the return on equity that they require. Thus, companies have to find the optimal point at which the marginal benefit of debt equals the marginal cost. As it can be difficult to pinpoint the optimal structure, managers usually attempt to operate within a range of values. They also have to take into account the signals their financing decisions send to the market.

A company with good prospects will try to raise capital using debt rather than equity, to avoid dilution and sending any negative signals to the market. Announcements made about a company taking debt are typically seen as positive news, which is known as debt signaling. If a company raises too much capital during a given time period, the costs of debt, preferred stock, and common equity will begin to rise, and as this occurs, the marginal cost of capital will also rise.

To gauge how risky a company is, potential equity investors look at the debt/equity ratio. They also compare the amount of leverage other businesses in the same industry are using on the assumption that these companies are operating with an optimal capital structure—to see if the company is employing an unusual amount of debt within its capital structure.

3 0
3 years ago
Which of the following career opportunities is growing the fastest?
Sunny_sXe [5.5K]

C: Market Research Analyst

7 0
4 years ago
Because a monopolistic competitor has some monopoly power, advertising to increase that monopoly power makes sense as long as
densk [106]

Answer: the marginal benefit of advertising exceeds the marginal cost of advertising

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5 0
3 years ago
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