1-Is a dollar worth more today than tomorrow? Why or why not
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1-Is a dollar worth more today than tomorrow? Why or why not? What is the relationship between present and future value?
2-What effect does an organization's bond rating have on its cost of capital? What are some factors that affect a corporate bond's value? Why is it necessary to value a bond in terms of today's dollars? What is the effect of an increase in the prevailing interest rate on the valuation of a bond? What is the relationship between interest rates and bond prices?
3- Should an organization have more debt or more equity in its capital structure? Explain your answer. What are some limitations of utilizing debt instead of equity in the capital structure?
4- What effect do fixed costs have on an organization's operating leverage? Under what market conditions should financial leverage be emphasized? What is the danger of being a highly leveraged organization?
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Solution Summary
1-Is a dollar worth more today than tomorrow? Why or why not? What is the relationship between present and future value?
2-What effect does an organization's bond rating have on its cost of capital? What are some factors that affect a corporate bond's value? Why is it necessary to value a bond in terms of today's dollars? What is the effect of an increase in the prevailing interest rate on the valuation of a bond? What is the relationship between interest rates and bond prices?
3- Should an organization have more debt or more equity in its capital structure? Explain your answer. What are some limitations of utilizing debt instead of equity in the capital structure?
4- What effect do fixed costs have on an organization's operating leverage? Under what market conditions should financial leverage be emphasized? What is the danger of being a highly leveraged organization?
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1-Is a dollar worth more today than tomorrow? Why or why not? What is the relationship between present and future value?
The statement is true. A dollar is worth more today than tomorrow because the dollar at today's value can be invested to yield a higher amount than a dollar invested in the future. The relationship between present and future value is that the present value is the current value of cash flow that comes from the discounted rate of cash flow. The future value is the amount of a present value investment after at least one period has passed. The relationship (and difference) between the present and future value are periods of time that have passed.
2-What effect does an organization's bond rating have on its cost of capital? What are some factors that affect a corporate bond's value? Why is it necessary to value a bond in terms of today's dollars? What is the ...
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