Business Financing and the Capital Structure FIN 100 March 3, 2014 Dr. Marcus Crawford Business Financing and the Capital Structure A business can be defined as an occupation, profession or trade (Dictionary.com, 2014). It can consist of a person or a partnership of some sort. With a business comes struggles and success, the way a person or partnership handles those struggles may determine their success or downfall. With any business their main purpose is to make money and to stay above
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themselves updated with all the technological advancements and innovations taking place, as a result financing needs are always arising. The financing could either be done through equity or debt. Equity would be more costly as compared to debt. Therefore, healthcare organizations would need to rise financing through various debt alternatives, one of which is bank loans. It is understood that the borrowing costs are lower for a merged firm, as compared to if the companies were not merged. Normally, a merged
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repurchasing shares and using debt financing to fund the strong expansion outlined for the company. In 2000 when CPK went public, it used the proceeds to pay off its outstanding debt and avoided debt financing. Analysis Questions: 1. To improve the company’s performance they would need to restructure their working capital policy and make use of the available leverage. CPK can use debt to repurchase stock and continue to grow and increase profits. Utilizing the debt would also reduce the tax
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Lucent Technologies Sheila D Griffith ACC230 University of Phoenix, Axia College January 17, 2013 Craig Hanson Lucent Technologies The asset, debt and equity structure of Lucent Technologies is quite stable. For the years of 2003 and 2004 there is a marked trend toward increased assets and decreased liabilities. The overall picture showing that 2004 had about 6% more in assets then did the other years. The changes were really not that great in any category but there was a decrease in
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The first part of the process is to calculate the c ost of the money; the required return on debt (r D ) and the required return on equity (r E ). To do this, an equity Beta for MCI is needed. This was done by comparing MCI returns to S&P 500 returns for a p eriod of 3 years and a period of 5 years. The Beta s were vastly different and so the Beta for the 3 yea r period was used so that the more current correlat ion could be used. MCI has been dramatically changing over the past 3
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cash flow into the company would help significantly. Evaluate solutions Pros Cons Should Jones Electrical decide to accept the loan from Southern Bank and Trust, it will receive funds to be able manage and expand its operations and pay off his debt. A loan is a liability and this will mean the firm will have another expense to pay at the
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$100 Debt $10 Equity $90 Question 3a. What is the firm’s weighted cost of capital at various combinations of debt and equity, given the following information? Debts/Assets After Tax Debt Cost Cost of Equity Cost of Capital (weight)(cost of debt) weight (cost of equity) = k (cost of capital) 0% 8% 12% 10 8 12% 20 8 12% 30 8 13% 40 9 14% 50 10 15% 60 12 16% Answer – Debts/Assets After Tax Debt Cost Cost of Equity Cost of Capital (weight)(cost of debt) weight
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with no return. Security is a negotiable instrument that represents a finance claim as form of ownership or by debt agreement. Stocks are securities that represents equity ownership of a company, which entitles you to vote the boards of the corporation, hold shares to the company’s success in a payment form of dividends and money value of security. Bonds are one of long-term debt and fixed income security market. Bonds are issued by the government to mutual funds, individuals, and businesses
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interest rate swap between two firms of different countries enables the exchange of __________ for __________. A) fixed-rate payments; floating-rate payments B) stock; interest deductions on taxes C) interest payments on loans; ownership of debt of less developed countries D) interest payments on loans; stock 4. If U.S. firms issue bonds in _______, the dollar outflows to cover fixed coupon payments increase as the dollar _______. A) a foreign currency; weakens B) dollars; strengthens
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There are many different types of short term financing including trade credit financing, Bank credit financing, and commercial paper financing. Trade credit financing is the most popular and includes approximately 40% of short term financing. Trade credit financing is when the seller of the goods gives an extended time for payment usually about 30-60 days, and can sometimes offer a cash discount. Businesses would choose this type of financing for the cash discount and because it does not have
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