Finance

Assume perfect capital markets except that taxes DO exist. Why does th

Assume perfect capital markets except that taxes DO exist. Why does the value of the interest tax shield accrue entirely to the shareholders and none of the value goes to the bondholders? What will be an ideal response?     ANSWER The value of the firm increases by the value of the interest tax shield […]

Read full post

Date: September 19th, 2020

When a firm has fixed operating costs, operating leverage is present.

When a firm has fixed operating costs, operating leverage is present. In that case, an increase in sales results in a more-than-proportional increase in EBIT, and a decrease in sales results in a more-than-proportional decrease in EBIT. Indicate whether the statement is true or false     ANSWER TRUE

Read full post

Date: September 19th, 2020

Which of the following is NOT commonly cited as a reason why managemen

Which of the following is NOT commonly cited as a reason why management needs to understand capital markets? A) Issuing securities to acquire capital is an ongoing process. B) Active markets have developed for the trading of securities, management needs to understand how these markets impact the firm’s constantly changing shareholder base. C) Capital markets […]

Read full post

Date: September 19th, 2020

Which of the following is NOT a generally accepted method of different

Which of the following is NOT a generally accepted method of differentiating in the financial markets? A) The Money market vs the Capital market B) The Primary market vs the Secondary market C) The Public market vs the Private market D) All of the methods above are used to differentiate in the financial markets.   […]

Read full post

Date: September 19th, 2020