a) What is financial leverage and why it is important? Click or tap here to enter...
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a) What is financial leverage and why it is important? Click or tap here to enter text. (2 Marks) b) After the covid-19 pandemic X Ltd is planning to expand their business by permanently moving to an online-based business model. As a part of the expansion strategy, they need to raise an additional 4 million and has the following financial structure. Equity Long-term Debts 3,000,000 4,000,000 Short-term Debts 800,000 Accounts payable Total 200,000 8,000,000 Calculate firm's interest-bearing debt ratio and debt ratio in its existing capital structure? Click or tap here to enter text. (4 Marks) c) Why is the volatility or variance in an investment's rate of return a reasonable indication of the risk of the investment? Click or tap here to enter text. (2 Marks) d) Companies that face large investments they cannot finance internally through the retention of earnings must go to the financial market to raise the needed funds. When they do this, they will incur what is commonly referred to as floatation cost. Discuss how these floatation costs should be incorporated into the firm's analysis of net present value. Click or tap here to enter text. (2 Marks) a) What is financial leverage and why it is important? Click or tap here to enter text. (2 Marks) b) After the covid-19 pandemic X Ltd is planning to expand their business by permanently moving to an online-based business model. As a part of the expansion strategy, they need to raise an additional 4 million and has the following financial structure. Equity Long-term Debts 3,000,000 4,000,000 Short-term Debts 800,000 Accounts payable Total 200,000 8,000,000 Calculate firm's interest-bearing debt ratio and debt ratio in its existing capital structure? Click or tap here to enter text. (4 Marks) c) Why is the volatility or variance in an investment's rate of return a reasonable indication of the risk of the investment? Click or tap here to enter text. (2 Marks) d) Companies that face large investments they cannot finance internally through the retention of earnings must go to the financial market to raise the needed funds. When they do this, they will incur what is commonly referred to as floatation cost. Discuss how these floatation costs should be incorporated into the firm's analysis of net present value. Click or tap here to enter text. (2 Marks)
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Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date:
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