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Why does the weighted average cost of capital of firms that uses more debt capital lower that that of a firm that uses less debt capital?
Wiki User
∙ 14y ago
Because the cost of debt is generally lower than the cost of equity. This is because in case of financial distress, debt-holders are repaid before the equity holders are, as well as because debt has the assets of the firm as collateral and equity does not.
Wiki User
∙ 14y ago
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If all firms only earn a normal profit in the long run firms will develop new products or lower-cost production methods because they can?
Innovate and possibly earn an economic profit in the short run.
Why Cost of preference capital is lower than cost of equity capital?
It depends on level of risk involved with certain type of capital, as low the risk factor as lower the cost or interest. That same formula applies to government securities as well.
Why firms outsource some of their functions?
There are reasons why firms outsource their functions, like: 1. Lower cost of labor 2. Shortage of Manpower 3. A need for specialized skills 4. Better Productivity 5. Efficiency ( Saves Time )
What is low capital formation?
Low capital formation is the prevalence of having savings lower than your debts. This often occurs during recessions in the economy.
Why do oligopolies avoid price competition?
Kinked Demand Curve Theory:It shows why prices in oligopolistic markets tend to remain stable, and why price competition creates price wars so firms compete on non-price factors instead.Price is at P on the graph. If one firm raised their price, other firms will lower there price and capture market share from the firm that initially raised its price. This is because more consumers are likely to buy from the firms with a low price rather than high price. So a rise in price results in a bigger fall in demand - ELASTIC demand. This means LOWER REVENUES for the firm that raised prices.If one firm lowered their price, because of interdependence, other oligopolies will also lower their price so as not lose their market share. Therefore firms will be competing on price which means all firms' revenues will be lowered. A decrease in price creates a smaller increased in demand - INELASTIC demand.Therefore, by lowering/raising firms will lose out either way, Therefore, in order to avoid price wars prices remain stable and firms use non-price competition (or firms may collude to create monopoly power).
How much does the average letter weigh?
Capital or lower case???
In a perfectly competitive market do firms exhibit productive efficiency?
in the short-run they are not able to but in the longrun it can be attainerd as businesses want to lower their average costs!
What is the capital of lower saxony?
The capital of Lower Saxony is Hanover (Hannover in German).
Should firms with higher business risk have lower leverage?
yes
What does risk weighted mean?
Risk weighting is a strategy used on occasion in investment pools such as mutual funds. In this situation, investments are weighted according to how much risk they carry. Riskier assets get a higher/lower weighting and less risky assets get a lower/higher weighting.
What is the difference of evaluation of inventory between weighted average method and FIFO method?
A method of inventory accounting in which the oldest remaining items are assumed to have been the first sold. In a period of rising prices, this method yields a higher ending inventory, a lower cost of goods sold, a higher gross profit (assuming constant price), and a higher taxable income. Also called FIFO.Method in calculation in which the weighted averagezzor the period is the cost of the goods available for sale divided by the number of units available for sale. When the perpetual inventory system is used, the weighted average method is called the moving average method.
Was Memphis the capital of Egypt?
Memphis was the capital of lower Egypt
what does Risk-Weighted Assets letters mean ?
Risk weighting is a strategy used on occasion in investment pools such as mutual funds. In this situation, investments are weighted according to how much risk they carry. Riskier assets get a higher/lower weighting and less risky assets get a lower/higher weighting.
What is the capital city of lower Normandy?
The capital city of Lower Normandy is Caen. It is located in the northwestern part of France and is known for its historical landmarks and cultural attractions.
Menes established the capital of lower Egypt at?
Pakastan4 test memphisfor a+memphis!!memphis
What is the capital of norden?
Norden is a city in Germany (Lower Saxony). It does not have a capital.
Advantages of listing a company on the stock exchange?
They include: Market exposure, access to funding, improved brand equity through listing, Lower dependency on venture capital firms and debt financing. Each stock exchange has different listing requirements.
