Explain influences of financial leverage (debt)
Does financial leverage (i.e. debt) have any influence on the Free Cash Flow, upon the Cash Flow to Shareholders, upon the growth of the company and upon the value of the shares?
Expert
Debt has no impact upon Free Cash Flow since this is, by definition, the flow to shares when the company had no debt. Though, the equity flow does depend upon the debt. It also affects the capitalization and the value of shares. If a company raises its debt, its capitalization reduces and, naturally and the price per share increase.
Flow variables: Any variable, whose magnitude is evaluated over a time period, is termed as glow variable.
You have joined Zurich Pvt. Ltd as a Finance manager. You are given the following information: Zurich Pvt Ltd. is a diversified manufacturing firm dealing with electrical appliances. In 2012, the firm reported an operating income of Rs. 857.60 million and faced a tax rate of 35% on income. The firm
Why can we not compute the required return (Ke) by the Gordon-Shapiro model [P0 = Div0 (1+g) / (Ke – g)] in place of using the CAPM? As we identify the current dividend (Div0) and the current share price (P0), we can acquire the growth rate of the dividend by th
Project Budget: Collecting all costs related with completing a project is budget process. The Project Management Institute states that "aggregating the predictable costs of individual actions or work projects (establishing) an authorized cost baseline
Commercial Paper: It is an unsecured obligation issued by the corporation or bank to finance its short-term credit requirements, like accounts inventory and receivable. Maturities usually range from 2 to 270 days. The commercial paper is accessible in
Is the difference for the value creation in a company among the market value of the shares (capitalization) and their book value a good measure since its foundation?
Does the book value of the debt all the time coincide with its market value?
Benefits of working capital requirement estimation: • Helps to judge the efficiency of utilization of working capital in generation of sales • Cost of capital aspect
For XYZ Corporation debt-to-equity ratio, marginal tax rate, and dividend payout ratio are all of 40%. The cost of debt is 10%. Cambria contains 1 million shares of common stock, and $25 million in long-term bonds. Its dividend is $1 per share. Determine the EBIT and
The AB Corp stock has a β of 1.15 and it will pay a dividend of $2.50 next year. The expected rate of return of the market is 17% and the current riskless rate is 9%. The expected rate of progress of AB is 4%. Find the value of its common stock.
18,76,764
1934968 Asked
3,689
Active Tutors
1457879
Questions Answered
Start Excelling in your courses, Ask an Expert and get answers for your homework and assignments!!