The more debt the firm issues, the higher the interest rate it must pay. That is one
Question:
The more debt the firm issues, the higher the interest rate it must pay. That is one important reason why firms should operate at conservative debt levels.” Explain fully your position on this statement.
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Answer rating: 72% (11 reviews)
In case increasing interest of debt it may reflect increasing risk that debt holders to bear What is relevant is the total cost of capital ie of debt and equity MM because of arbitrage total cost of c...View the full answer
Answered By
Gauri Hendre
I worked as EI educator for Eduphy India YT channel. I gave online tutorials to the students who were living in the villages and wanted to study much more and were preparing for NEET, TET. I gave tutions for topics in Biotechnology. I am currently working as a tutor on course hero for the biochemistry, microbiology, biology, cell biology, genetics subjects. I worked as a project intern in BAIF where did analysis on diseases mainly genetic disorders in the bovine. I worked as a trainee in serum institute of India and Vasantdada sugar institute. I am working as a writer on Quora partner program from 2019. I writing on the topics on social health issues including current COVID-19 pandemic, different concepts in science discipline. I learned foreign languages such as german and french upto A1 level. I attended different conferences in the science discipline and did trainings in cognitive skills and personality development skills from Lila Poonawalla foundation. I have been the member of Lila poonawalla foundation since 2017. Even I acquired the skills like Excel spreadsheet, MS Office, MS Powerpoint and Data entry.
5.00+
4+ Reviews
10+ Question Solved
Related Book For
Principles of Corporate Finance
ISBN: 978-0072869460
7th edition
Authors: Richard A. Brealey, Stewart C. Myers
Question Posted:
Students also viewed these Economics questions
-
CAPM v2 Next year the expected market return is 5.4% and the risk-free rate is 1%. a. What is the expected return of a stock with a beta of 0.56 according to the CAPM? Answer in percentage form with...
-
What is the most important reason why firms should be required to show an expense on their income statement for employee stock options?
-
Write a memo to Linda explaining your position on this problem and why you think it would be the best solution Write second memo to the CEO that describes two or three ways of ensuring that employees...
-
The cable is subjected to a uniform loading of w = 60 kN/m. Determine the maximum and minimum tension in cable. -100 m- 12 m
-
(Kellogg's) acquired 75% of the outstanding stock of Wholesome & Hearty Foods ("Wholesome") at the end of 2007, for cash and stock totaling $120 million. Assume that Wholesome's assets and...
-
Which of the following captures all interactions with a customer? a. Customer journey analytics b. Digital analytics c. Social media analytics d. Web analytics
-
Assume that IHOP sold all 1,000 shares of its treasury stock for \(\$ 15\) per share. The sale of treasury stock a. Decreased total equity by \(\$ 15,000\) b. Increased total equity by \(\$ 5,000\)...
-
Recreational Supplies Co. has net sales of $11,655,000, an ROE of 17.64 percent, and a total asset turnover of 2.89 times. If the firm has a debt-to-equity ratio of 1.43, what is the companys net...
-
Using a country of your choice obtain CPI data and reports for 2015 to 2020. a. Using trend analysis identify the basket (s) of goods which contributed the most to inflation. 10 marks b. What are the...
-
1. Develop a multiple regression equation using unemployment rate and average monthly temperature to predict emergency road service calls. 2. Create a new temperature variable and relate it to...
-
Controlled disbursing is defined as an information productthat is, the bank on which the companys checks are drawn provides an early-morning notification of the total dollar amount of checks that...
-
Based on the product demand for the past five years for XYZ Company. Using two-year average and trend analysis identify which method is the most appropriate and make a forecast for year six. What...
-
The purchasing officer for Cellar Cork Ltd has prepared a purchases budget for the financial year ending 31 March 2025, based on the following data. Required (a) Calculate the amount of purchases...
-
What will the following code output? (10 points) int *numbers = new int[5]; for (int i = 0; i
-
A 10 L cylinder contains 100 mol mixture of propane, n-butane and iso-butane, where the compositions are 60 mol%, 15 mol% and 25 mol% respectively. The temperature inside the cylinder is 120C and are...
-
Here is a Java program to get the sum of a Array of numbers. String[] numbers={"3", "5", "6", "9", "10"); // line 1 int sum = 0; // line 2 for (int i=0; i
-
Vogel, Inc., an S corporation for five years, distributes a tract of land held as an investment to Jamari, its majority shareholder. The land was purchased for $116,000 ten years ago and is currently...
-
Write a java program to perform sum of array elements.
-
A study was made to see whether a correlation existed between students' grades in a course and students' rankings of the professor's teaching.* The results of this survey are shown in Table 14.13....
-
Borrowing costs should be recognised as an expense and charged to the profit and loss account of the period in which they are incurred : A. If the borrowing costs relate to qualifying asset B. If the...
-
Medhat International is a manufacturing firm operated along Islamic principles. They wish to raise 20 billion Bahrain dinars and pay this back in equal instalments over 6 years. Comparable Western...
-
Identify three situations in which accounting measures are based on present values. Do these present value applications involve single sums or annuities, or both single sums and annuities? Explain.
-
What is the nature of interest? Distinguish between simple interest and compound interest.
-
What are the components of an interest rate? Why is it important for accountants to understand these components?
-
What is corrections? Discuss each of the following forms of early corrections: The workhouse Transportation Hulks Explain each of the following: The Pennsylvania system The Auburn system The...
-
Calculate the missing amounts. (Loss amounts should be indicated with a minus sign and input all other amounts as positive values. Do not round intermediate calculations. Round "Gross profit ratio"...
-
Sharon was hired by the Beauty Mark Company to sell beauty products house to house in a certain town. Unknown to either Sharon or Beauty Mark, there is an ordinance required all salespersons to...
Study smarter with the SolutionInn App