Suppose that a firm has both fixed-rate and floating-rate debt outstanding. What effect will a decline in
Question:
Suppose that a firm has both fixed-rate and floating-rate debt outstanding. What effect will a decline in interest rates have on the firm’s times-interest-earned ratio? What about the ratio of the market value of debt to that of equity? Would you judge that leverage has increased or decreased?
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Answer rating: 63% (11 reviews)
Timesinterest earned equals EBIT interest payments Wi...View the full answer
Answered By
Usman Nasir
I did Master of Commerce in year 2009 and completed ACCA (Association of Chartered Certified Accountants) in year 2013. I have 10 years of practical experience inclusive of teaching and industry. Currently i am working in a multinational company as finance manager and serving as part time teacher in a university. I have been doing tutoring via many sites. I am very strong at solving numerical / theoretical scenario-based questions.
4.60+
16+ Reviews
28+ Question Solved
Related Book For
Principles of Corporate Finance
ISBN: 978-0077404895
10th Edition
Authors: Richard A. Brealey, Stewart C. Myers, Franklin Allen
Question Posted:
Students also viewed these Corporate Finance questions
-
Suppose that a firm has the production function f(x1, x2) = x1 + x22 . (a) The marginal product of factor 1 (increases, decreases, stays constant) ________ as the amount of factor 1 increases. The...
-
Suppose that a firm has the following Cobb - Douglas production function: Q = 12K0.75L0.25. a. What must its long-run total cost curve look like? Its long-run average total cost curve? b. How do your...
-
What effects do market interest rates have on the price behavior of outstanding bonds?
-
They are considering trading their car in for a newer used vehicle so that Harry can have dependable transportation for commuting to work. The couple still owes $5,130 to the credit union for their...
-
Of all the weld failures in a certain assembly, 85% of them occur in the weld metal itself, and the remaining 15% occur in the base metal. A sample of 20 weld failures is examined. a. What is the...
-
Use the atomic theory of matter to explain why the resistance of a material should increase as its temperature increases.
-
Compare the export rankings of the top ten leading exports of 1999 with the rankings of the top ten leading exports in 2010 (see Table 1.3). Discuss some of the reasons why these rankings have...
-
Split Second Wireless, Inc., began 2012 with total assets of $100 million and ended 2012 with assets of $190 million. During 2012, Split Second earned revenues of $97 million and had expenses of $26...
-
Using the financial data in the table below, compute Net Cash Flows from Investing Activities for Investco-2, Inc. for Year-2. Year-1 Year-2 Cash 18,760 19,450 Accounts receivable 337,680 311,200...
-
Watershed is a media services company that provides online streaming movie and television content. As a result of the competitive market of streaming service providers, Watershed is interested in...
-
Describe some alternative measures of a firms overall performance. What are their advantages and disadvantages? In each case discuss what benchmarks you might use to judge whether performance is...
-
We noted that, when calculating EVA, you should calculate income as the sum of the aftertax interest payment and net income. Why do you need to deduct the tax shield? Would an alternative be to use a...
-
In Figure 11.9, the following EN and XY coordinates for points A through C are given. In a 2-D conformal coordinate transformation, to convert the XY coordinates into the EN system, what are the (a)...
-
Two particles are located on the \(x\) axis of a Cartesian coordinate system. Particle 1 carries a charge of \(+2.0 \mathrm{nC}\) and is at \(x=-30 \mathrm{~mm}\), and particle 2 carries a charge of...
-
Particle 1 carrying charge \(q\) is at the origin of an \(x y\) coordinate system, particle 2 carrying charge \(-2 q\) is at \((1,0)\), and particle 3 carrying charge \(3 q\) is at \((0,1)\). What is...
-
Four negatively charged particles each carry a charge \(q_{\mathrm{n}}\) and form a square of side length \(d\). A positively charged particle carrying a charge \(q_{\mathrm{p}}\) is at the square's...
-
Particle 1 carrying \(-4.0 \mu \mathrm{C}\) of charge is fixed at the origin of an \(x y\) coordinate system, particle 2 carrying \(+6.0 \mu \mathrm{C}\) of charge is located on the \(x\) axis at...
-
You have two marbles, one carrying a uniformly distributed charge \(q_{\mathrm{p}}=+1.0 \mu \mathrm{C}\) and the other carrying a uniformly distributed charge \(q_{\mathrm{n}}=-0.50 \mu \mathrm{C}\)....
-
How would the cash flow curve presented for Evergreen Construction Company change if: a. The project start date was delayed for one month, b. All of the site improvements were re-scheduled to be...
-
Controls can be identified based on their function. The functions are preventive, detective, and corrective. A. True B. False
-
Suppose the many American firms making home burglar alarm systems decide (independently) to shift the production of their alarms to Asia or Latin America, where they can be made at a much lower cost....
-
Digital Organics (DO) has the opportunity to invest $1 million now ( ) and expects after-tax returns of $600,000 in and $700,000 in . The project will last for two years only. The appropriate cost of...
-
You are considering a five-year lease of office space for R&D personnel. Once signed, the lease cannot be canceled. It would commit your firm to six annual $100,000 payments, with the first payment...
-
Consider another perpetual project like the crusher described in Section 19.1. Its initial investment is $1,000,000, and the expected cash inflow is $85,000 a year in perpetuity. The opportunity cost...
-
1). The Electronic Corporation manufactures two electrical products: air conditioners and large fans. The assembly process for each is similar in that both require a certain amount of wiring and...
-
After reviewing oceanview marine company's case materials, and reviewing the unaudited account balances, what is your preliminary view on the client's ability to continue as a going concern? What is...
-
For each chemical reaction listed in the table below, decide whether the highlighted atom is being oxidized or reduced. reaction highlighted atom is being... neither oxidized reduced oxidized nor...
Study smarter with the SolutionInn App