Placeholder

FIN 571 WEEK 3 DQs__2 SETS OF ANSWERS

$10.00

Category: .

Product Description

  • Describe the risks that are associated with a restrictive current asset investment strategy.

 

  • You work for a venture capital firm and are approached to finance a new high-tech start-up. While you believe in the business idea, you also believe it is very risky. What strategies can help to mitigate the risk to your firm? Explain how these measures would work.

 

  • Two theories of capital structure: Use the information in the following table to make a suggestion concerning the proportion of debt that the firm should utilize in its capital structure.
Benefit or (Cost)

No Debt

25% Debt

50% Debt

75% Debt

Tax shield

  $ 0

  $10

  $20

  $30

Agency cost

−$10

−$ 5

−$ 5

−$20

Financial distress cost

−$ 1

−$ 3

−$10

−$10