Answer:
The correct answer is how much debt should be assumed to fund a project.
Explanation:
The first thing that must be specified is that a company can be leveraged through debt, contributions from partners or equity, and that the relationship between these two variables will be the capital structure of the company. In addition, one could say that success comes with more certainty to a company that evaluates different possibilities in which these two forms of leverage come into play.
The term optimal structure, in finance, includes the close relationship that exists between the costs and benefits that may be the product of different forms of leverage. One of the points that financial advisors take into account to measure such relationship are the tax advantages that an entrepreneur can acquire when making financial decisions and the decisions he makes regarding the leverage he wishes to obtain.
The following are some of the aspects that are evaluated when looking for an optimal capital structure:
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Financing costs can be high as a result of the company neglecting its good name before the financial sector; In case the company does not comply with the business hypothesis underway or has a bad habit of payment, it can lead to high interest rates and unfavorable conditions or, in the worst case, close the doors in the financial sector.
- Having a good payment capacity and a good habit of timely payment will be key when requesting a loan, not only for obtaining the credit itself, but because you can obtain proposals from different financial institutions and take advantage of the best rates and benefits.
- The portfolio purchase options are always a good ally to improve the cash flow of the organization, to take advantage of this it is necessary to evaluate the rate, term and additional conditions that this new financing includes.
- The company must find that different transactions are not restricted in the contracts it makes with third parties. Having to subject the activity to the clauses imposed by suppliers or allies, can cause you to miss the opportunity to take advantage of other businesses.
- The agency theory and the moral hazard problem is something that must be taken care of very carefully, since the level of autonomy that the administrator has in the company can jeopardize the offer of value that the investor expects to receive. There have been cases in which the bad decisions of the administration, whether due to errors or fraud, have caused bankruptcy cases or penalties.
In reality, an optimal capital structure is found when investors obtain a significant value offer, that is, that the earnings per share –UPA– are greater, and when financial leverage is used without exceeding market risk levels, but it should also be clarified that all this varies according to the economic conditions of the country and the sector in which the company is located. Finally, it goes without saying that supporting the evaluation of decisions through different financial indicators makes it possible to make a more accurate decision in all cases.
Answer:
Return on equity(r) = 0.16
Plowback ratio(b) = 50 = 0.5
Earnings per share(EPS) = $2
D1 = 50% x $2 = $1
Cost of equity(Ke) = 0.12
Growth rate(g) = b x r
= 0.5 x 0.16
= 0.08 = 8%
Current market price(Po) = D1/Po + g
= $1/0.12 - 0.08
= $25
Market price in 3 years = Po(1+g)n
= $25(1+0.08)3
= $25(1.08)3
= $31.49
Explanation:
In this case, we need to calculate growth rate by multiplying the plowback ratio by return on equity. Then, we will calculate the current market price as shown above. Thereafter, we will subject the current market price to a 3-year growth rate to calculate the market price in 3 year's time
FIFO stands for First In First Out and LIFO stands for Last In First Out.
Answer: LIFO produces more favorable cash flow because LIFO PRODUCES LOWER INCOME TAX EXPENSE.
During inflation, LIFO approach is adopted for tax benefits. With the rise in prices, LIFO produces higher cost of sold amounts of goods.
Answer:
The answer is: C) were adopted at its first organizational meeting.
Explanation:
Corporation bylaws are generally approved and adopted when the organization is being created, and they refer to the basic rules about how the corporation will work and how it will be organized.
Corporate bylaws are the basic guidelines that describe what are the responsibilities of top management, the board of directors and stockholders.
