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san4es73 [151]
2 years ago
7

You are the CFO of Rock Inc, a young start-up. The company has not generated positive cash flows for the past three years and yo

u estimate that it will take at least another 2 years for the company to become cash flow positive. To fund the next phase of growth, what should be a better source of capital, debt or equity? Why?
Business
1 answer:
Nezavi [6.7K]2 years ago
8 0

Answer:

Equity

Explanation:

The choice should be very straight forward, the company doesn't generate enough cash, and if it takes debt, it will not be able to pay it back. The only choice for raising capital is through issuing equity.

This is something normal for many startups, e.g. FB, Amazon, Google, etc., all got financed through equity for several years before being able to issue debt.  Of course debt is cheaper than equity, but it also poses a risk for the company.

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100 million diluted shares outstanding trading at $37.50 per share. The company has $1 billion of debt outstanding with a cost o
Pepsi [2]

Answer:

$4,650,000,000

Explanation:

We will use the formula below to calculate the enterprise value of Correct inc.

Enterprise value = Market value capital and debts - Cash and investments

= 100 million diluted shares × 37.50 per share + $1 billion of debt outstanding - $100 million cash

= $3750m + $1000m - $100m

= $4,650,000,000.

4 0
3 years ago
Assume that the bank says Frank can have the money and would like to work with him on the type of debt that he will be incurring
IceJOKER [234]

Answer:

It is better for Frank, to go for a line of credit

Explanation:

It is better for Frank, to go for a line of credit, as this will enable him to have the lowest interest payment.  This will also help him to draw for his services and also enable him to be repaying the in small amounts so that the operations are not affected.

7 0
3 years ago
Which of these factors would strengthen demand for a nation’s currency on the international market? Select all that apply.
-BARSIC- [3]

Answer:

B C D F

Explanation:

3 0
2 years ago
Read 2 more answers
What is an argument in favor of a $15 minimum wage
tamaranim1 [39]

The idea for a $15/hour minimum wage is to provide a <u>living wage</u> for employees, meaning that they can meet their basic housing, food, medical, and living expenses when working full time at minimum wage.

7 0
3 years ago
beta of 0.88 and an expected dividend growth rate of 4.00% per year. The T-bill rate is 4.00%, and the T-bond rate is 5.25%. The
gregori [183]

Answer:

RA=11.6%

Explanation:

RA=Rf+(Rm-Rf)Ba

RA=?

Rf=5.25%

Rm=12.5%

Ba=.88

RA=5.25%+(12.5%-5.25%).88

6 0
3 years ago
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