What are the benefits of borrowing money for capital investment?
What will be an ideal response?
Borrowing money for capital investment provides two benefits:
(1) It enhances the potential for higher rates of return for the owners.
(2) It allows the owners to keep a greater level of control of the business.
Borrowing increases potential profits by lowering the weighted average cost of capital and by providing capital funds that allow the business to consider additional opportunities.
You might also like to view...
Flannery Company, a manufacturer of small appliances, had the following activities, allocated costs, and allocation bases:
The above activities are carried out at two of its regional offices.
A power of attorney is an example of a(n) ________ agreement
A) agency by ratification B) apparent agency C) express agency D) implied agency
Bruce believes a local manufacturer is responsible for contaminating some land he owns. He filed suit against the company
Rather than have the case go to court, the manufacturing company's legal team suggested mediation or arbitration to settle the case. Methods that are employed to resolve legal disputes without litigation, such as mediation, are called A) collateral source rules. B) alternative dispute resolution techniques. C) joint and several liability techniques. D) comparative negligence rules.
The ________ is the intercept on the Security Market Line
A) prime rate B) risk-free rate C) market rate of return D) beta