Answer:
No, it is a bad idea to use only the cost of debt
Explanation:
Only using the cost of debt, is not a good idea because too much amount of borrowing could lose the confidence of the investors and it could lead to the uncertainty in the future cash flows.
Suppliers might be worried regarding the financial situation and lead to the supply disruption. Though, the debt might save the tax expenses, which could lead to the negative cash flow.
When the company does not have adequate amount of cash at hand, it could cause many disruptions of financial. WACC (Weighted Average Cost of Capital) rates need to be used as the capital costs as it weigh the used capital cost and the used debt.
<span>Imagine
an economy in which:
(1) pieces of paper called yollars are the only
thing that buyers give to sellers when they buy goods and services, so
it would be common to use, say, 50 yollars to buy a pair of shoes;
(2)
prices are posted in terms of yardsticks, so you might walk into a
grocery store and see that, today, an apple is worth 2 yardsticks; and
(3) yardsticks disintegrate overnight, so no yardstick has any value for
more than 24 hours.
In this economy, the yardstick is a unit of account but it cannot serve as a store of value.</span>
Answer:
5) Dealer
Explanation:
1) Broker: A person who arranges a transaction between two parties
2) Commission Broker: The person who executes buy and sell orders on behalf of customers.
3) Floor Broker: The person who executes buy and sell orders on the floor of an exchange and charges his fee for it.
4) Floor Trader: The person who buys and sells for his personal account and owns a trading license.
5) Dealer: An agent who buys and sells securities from inventory.
Answer:
$930.11
Explanation:
We will first find the YTM
Par value 1000
Couple rate 8.50%
N 24
PV $925
PMT $85
FV $1000
We are going to use YTM to find the bonds price of 5 years .
Therefore:
Value in 5 years will be:
N 20
I/YR 9.28%
PMT 85%
FV $1,000
PV $930.116
