Which of the following describes an option ? Question 4 ( FINM-0034 )
A company has $ 1,500,000 of outstanding debt and $ 1,000,000 of outstanding common equity . Management plans to maintain the same proportions of financing from each source if additional projects are undertaken . If the company expects to have $ 60,000 of retained earnings available for reinvestment in new projects in the coming year , what dollar amount of new investments can be undertaken without issuing new equity ?
Value of equity Value of debt + Value of equity
Since the question states that the firm will maintain the same weight of each financing source , each dollar invested is composed of 40 cents of equity and 60 cents of debt . The first $ 60,000 of equity used in financing new projects is sourced from retained earnings . This source of equity is exhausted when the firm reaches an investment level of
$ 60,000 / . 4 = $ 150,000 . When the level of investment exceeds this amount , equity financing must be raised externally .
Question 5 ( FINM-0024 )
DQZ Telecom is considering a project for the coming year that will cost $ 50,000,000 . DQZ plans to use the following combination of debt and equity to finance the investment :
Question 6 ( RMCB-0026 ) Which of the following describes a normal yield curve ? Question 7 ( FINM-0073 )
Which of the following types of bonds is most likely to maintain a constant market value ?