23.5.B - Financing Decisions
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Practice Questions
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What are the two main types of financing sources?
💡 Hint: Think about how companies get money.
What is financial leverage?
💡 Hint: Focus on the relationship between debt and profit.
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Interactive Quizzes
Quick quizzes to reinforce your learning
Which of the following is a source of equity financing?
💡 Hint: Think about how a company can gain investors.
True or False: Financial leverage increases the potential for profit but also the risk of loss.
💡 Hint: Consider the effect of debt on outcomes.
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Challenge Problems
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A tech company is considering whether to raise funds through debt or equity to finance a new project. Analyze the risks and benefits of each option given their current financial state.
💡 Hint: Consider current debt levels and market conditions.
Calculate the cost of capital for a company planning to fund its operations using 60% debt at an interest rate of 5% and 40% equity with a required return of 10%. What would be the company’s weighted average cost of capital?
💡 Hint: Use the formula for WACC considering the proportions of each financing method.
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