Which of the following individuals would be most hurt by an unanticipated increase in inflation ?
Question 1 ( FINM-0082 )
Which of the following statements is correct regarding the weightedaverage cost of capital ( WACC )?
Question 2 ( FINM-0066 )
The benefits of debt financing over equity financing are likely to be highest in which of the following situations ?
Question 3 ( RMCB-0027 ) 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