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benefit of debt and equity financing

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โˆ™ 2009-10-12 18:32:50
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Q: Cost and benefits of debt financing and equity financing?
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Related questions

What is financing mix?

it is the mix of debt and equity financing for an organization. it means the ratio of debt and equity in the finance of an organization. it may be debt free and full equity financing and vice versa.


What are the advantages and disadvantages for AMSC to forgo their debt financing and take on equity financing?

What are the advantages and disadvantages for AMSC to forgo their debt financing and take on equity financing?


Which is an advantage of equity financing over debt financing?

One advantage of equity financing over debt financing is that it's possible to raise more money than a loan can usually provide.


What are the two basic types of financing used by a corporation?

They are equity financing and debt financing.


When a firm initially substitutes debt for equity financing what happens to the cost of capital and why?

According to the balance sheet and the optimal capital structure and the current balance sheet, when an organization makes substitutes the company's equity for financing all of the cost for the capital is prone to decrease particularly when the company's cost of their debt appears to be lower with the cost of the company's equity.


What are 3 types of financing?

Equity, debt and uh, SECURED debt?


The weighted average cost of capital is defined as the weighted average of a firm's what?

The weighted average cost of capital is the average cost of a firms financing i.e. both debt and equity financing. Usually debt is much cheaper than equity due to equity investors higher risk appetite. The return they expect hence is much higher than banks and bond holders. The cost of debt is also net of tax benefit as interest on debt is tax deductible which reduces the tax liability of a firms profits.


Match each type of financing with the method used to obtain it. Debt financing equity financing public financing?

Debt financting-taking a loan from a bank Equity financting-selling owership in the company public offering-selling shares of stock on the open market


Why cost of equity is higher than cost of debt?

Because in the case of bankruptcy, debt holders are repaid before equity holders, therefore decreased risk for debt. Debt is collateralised by the assets of the firm, equity is not.


What is the ebit-eps indifference point?

The EBIT-EPS indifference point is a calculation used in determining optimal capital structures. What that means is firms typically finance their operations with two primary means, equity and debt. Back to the indifference point, algebraically and graphically when the earnings per share for debt and equity financing alternatives are equal, you have the EBIT-EPS indifference point. Put another way a firm can finance their operations at the same cost, with either debt or equity, at the indifference point. EPS (debt financing) = EPS (equity financing)


If you have the debt assets after taxes percent of 10 percent cost of debt 8 percent and cost of equity 12 percent how is cost of capital calcuated?

WACC = Cost of Debt * Weight of Debt = + Cost of equity * Weight of Equity WAAC = .08*.10 + .12*.90 WAAC = 10.88%


What is an advantage of equity financing over debt financing?

It's possible to raise more money than a loan can usually provide.

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