In this essay I shall be discussing the factors which influence the level of and access to unsecured debt held by households. In the early 1980’s the conservative government headed by Margaret Thatcher‚ began to liberalise the financial industry. This promoted more competition between firms to attract customers‚ and offer credit facilities to a wider range of consumers. Companies used aggressive marketing to attract customers‚ but the amount of different products available on the market to customers
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requirements (e.g. difficulties for Massey to be successful in North America due to its portfolio of products). • Offer financing services to distributors and retail buyers. Q2: PRODUCT MARKET STRATEGY • 1970s years of dramatic growth financed by debt • Strength in less developed countries outside North America and Western Europe • Very successful before 1976 (exhibit 4) for several reasons • Focus on future growth markets with almost no competition • Diversified against political and other
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Chapter #19‚ Quizz Quizz‚ Chapter 19 1.Calculate the weighted-average cost of capital (WACC) for Federated Junkyards of America‚ using the following information: • Debt: $75‚000‚000 book value outstanding. The debt is trading at 90 percent of par. The yield to maturity is 9 percent. • Equity: 2‚500‚000 shares selling at $42 per share. Assume the expected rate of return on Federated’s stock is 18 percent. • Taxes: Federated’s marginal tax rate is Tc = .35 What are the key assumptions
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of the effects of different sources of capital on investment decisions in Astra Holdings Limited. An examination was carried out on specific components of debt‚ equity and working capital and the reasons for preferring one financing method to the other. Furthermore‚ the balance sheet movements of compositions of certain elements relating to debt‚ equity and to a lesser extent working capital were analysed over a period of three years. The main target of this scrutiny was to expose the effects of the
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financed. It has 10‚000 shares of equity outstanding‚ selling at $100 a share. The firm is considering a capital restructuring. The low-debt plan calls for a debt issue of $200‚000 with the proceeds used to buy back stock. The high debt plan would exchange $400‚000 of debt for equity. The debt will pay an interest rate of 10%. The firm pays no taxes. a. What will be the debt-to-equity ratio after each possible restructuring? b. If earnings before interest and tax (EBIT) will be either $90‚000 or $130
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Rite Aid 1) a. The secure debt of Rite Aid is tied to specific assets. Unsecured debt is money that Rite Aid borrowed from financial institutions and has no collateral tied to it. Rite Aid distinguish between these two types of debt to give a clear pictures to investors‚ credit rating agencies‚ and lenders that they will be able to make interest and principal payments on time. b. A guarantee debt is an assurance if one party defaults; another party will pay the debt. Rite Aid wholly-owned subsidiaries
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as the firm’s investment decisions are taken as given” Then why do corporations: Set up independent companies to undertake mega projects and incur substantial transaction costs‚ e.g. Motorola-Iridium. Finance these companies with over 70% debt inspite of the projects typically having substantial risks and minimal tax shields‚ e.g. Iridium: very high technology risk and 15% marginal tax rate. Contents The MM Proposition What is a Project? What is Project Finance? Project
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Activities Debt to Equity (Total Liabilities / Total Equity) [pic] This ratio measures the financial leverage of a company by indicating what proportion of debt and equity a company is using to finance its assets. A lower number suggests there is both a lower risk involved for creditors and strong‚ long-term‚ financial security for a company. Based on the debt ratio of Toyota‚ as of 2009‚ the debt ratio is much higher than of other financial year. The year to year debt ratio shows a declining
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amount a firm borrows (c) The expected return on a firm’s stock is independent of capital structure (d) a and b (e) b and c (f) a and b and c 4. The expected return on a firm’s stock is 20% and currently the firm has no debt. The firm is contemplating changing its debt-equity ratio to 1 There are no corporate or personal taxes and the risk-free interest
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default on his debt obligations. It considers factors‚ such as repayment history and credit score.” The financial dictionary (2017) has this to say‚ “The ability to borrow money. The better one’s creditworthiness‚ the more likely it is that a bank or other financial institution will extend credit.” Therefore‚ creditworthiness is an evaluation of credit risk of a prospective debtor‚ this can be an individual‚ a business or a government predicting its ability to pay back the debt and forecasting
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