Question

In: Economics

When your Cost of borrowing exceeds your rate of return you are more likely to gain...

When your Cost of borrowing exceeds your rate of return you are more likely to gain an advantage in most situations related to borrowing capital

True False

Solutions

Expert Solution

False, when the cost of borrowing is more than the rate of return then we are at an disadvantage in most of the things related to borrowing because the cost i.e. the interest will be more than the profit in the market.


Related Solutions

Calculate the rate of return and rate of capital gain for the following bonds given the...
Calculate the rate of return and rate of capital gain for the following bonds given the market interest rate of 9%: Bond A: Matures in 7 years, offers a coupon rate of 12% and has a face value of $10,000 Bond B: Matures in 6 years, offers a coupon rate of 7% and has a face value of $7000
Leasing is more likely to be advantageous when the lessor's tax rate is substantially higher than...
Leasing is more likely to be advantageous when the lessor's tax rate is substantially higher than the lessee's. True or False Please explain
When the opportunity cost of capital (or discount rate) increases, how is that increase likely to...
When the opportunity cost of capital (or discount rate) increases, how is that increase likely to affect the economic profitability of a proposed project
Which of the firms below is likely to receive the most favorable terms when borrowing money...
Which of the firms below is likely to receive the most favorable terms when borrowing money from the bond market? Firm A: cash coverage ratio = 0.6 and debt-to-equity ratio = 1.2 Firm B: cash coverage ratio = 0.8 and debt-to-equity ratio = 1.5 Firm C: cash coverage ratio = 1.5 and debt-to-equity ratio = 0.6 Firm D: cash coverage ratio = 1.2 and debt-to-equity ratio = 0.8
Is the dollar equivalent utility gain likely to be greater or less when purchase of half...
Is the dollar equivalent utility gain likely to be greater or less when purchase of half gallon as opposed to gallon quantities is allowed? A. Greater B. Less C. The same D. Can’t be determined
In your judgment, are acquirers more likely to under or overestimate anticipated cost savings? Why?
In your judgment, are acquirers more likely to under or overestimate anticipated cost savings? Why?
Suppose that T-bills currently have a rate of return of 2%. As- sume that borrowing is...
Suppose that T-bills currently have a rate of return of 2%. As- sume that borrowing is possible at the risk free rate. You are risk averse and you are considering constructing a portfolio consisting of T-bills and one of the two risky assets: Stock A or Stock B. You did the following scenario analysis on stocks A and B Events Bull Market Normal Market Bear Market Probability Stock Aís return 0.3 50% 0.5 18% 0.2 -20% Stock Bís return 10%...
Generally, when would it be more beneficial for a taxpayer to not defer gain with a...
Generally, when would it be more beneficial for a taxpayer to not defer gain with a like-kind exchange?
7. When you submit your tax return to the IRS, they screen your return for indications...
7. When you submit your tax return to the IRS, they screen your return for indications of fraud. Naturally the screening system is not perfect: only 92% of fraudulent tax returns get red-flagged (that is, the IRS’ system detects the fraud), and 9% of honest tax returns get red-flagged (the system mistakenly believes these good returns to be fraudulent). A tax return the IRS believes not to be fraudulent is said to be “green-flagged.” Suppose that 4% of all tax...
1) You wonder whether men or women are more likely to be driving when both a...
1) You wonder whether men or women are more likely to be driving when both a man and a woman are in the front seat of a car. You observe 20 cars with both a man and a woman in the front seat and count how many times the man is driving. Of the 20 cars you observed, the man was driving in 15 of them. What is the probability value for this result? (Give your answer to at least...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT