Finance

Michigan Manufacturing Inc. (MM) has a new project that will require t

Michigan Manufacturing Inc. (MM) has a new project that will require the company to borrow $1,000,000. MM has made an agreement with three lenders for the needed financing. First National Bank will give $500,000 and wants 9% interest on the loan. Key West Bank will give $300,000 and wants 11% interest on the loan. Chase […]

Read full post

Date: September 19th, 2020

A firm’s capital structure can be determined by examining which parts

A firm’s capital structure can be determined by examining which parts of the firm’s balance sheet? A) The long-term assets B) The debt and equity C) The short-term assets and liabilities D) None of the above because a firm’s capital structure is best observed on the income statement.     ANSWER Answer: B Explanation: B) […]

Read full post

Date: September 19th, 2020

As debt is substituted for equity in the capital structure and the deb

As debt is substituted for equity in the capital structure and the debt ratio increases, the behavior of the overall cost of capital is partially explained by ________. A) the tax-deductibility of interest payments B) the increase in the number of common shares outstanding C) the reduction in risk as perceived by the common shareholders […]

Read full post

Date: September 19th, 2020

Which of the following would be classified as debt lenders for a firm?

Which of the following would be classified as debt lenders for a firm? A) Preferred shareholders, banks, and nonbank lenders B) Nonbank lenders, common shareholders, and commercial banks C) Preferred shareholders, common shareholders, and suppliers D) Suppliers, nonbank lenders, and commercial banks     ANSWER Answer: D Explanation: D) Preferred stockholders are hybrid equity lenders, […]

Read full post

Date: September 19th, 2020

What is an incremental cash flow for a project? What concepts do we ne

What is an incremental cash flow for a project? What concepts do we need to examine to help understand how to estimate the incremental cash flow of a project? What else is needed for deciding whether or not to choose a project? What will be an ideal response?     ANSWER Answer: The incremental cash […]

Read full post

Date: September 19th, 2020