In: Finance

A rapidly growing small firm does not have access to sufficient external financing to accommodate its planned growth. Discuss what alternatives the company can consider in order to implement its growth strategy. How can the firm determine the cost of those alternative sources of capital?

**Smaller companies that are rapidly growing, can raise
funds from these alternatives:**

**Bank Loan-** They can take loan from bank, banks
charge interest on the loan, bank loan is not easily available for
start up companies as banks see the past history of the company but
still it can be provided by showing the legal documents of the
company and growth potential in the future.

**Small business investment centers**- These are
licensed financial institutions and regulated by "Small business
Administration". These provide funds to small business and start up
companies.

**Investment banking-** Investment bankers issue
the small companies' shares to the public and public gives money to
the company and in return, it gets shares of the company. This
option is available for smaller companies that have good growth in
past years.

**Loan from family and friends-** Smaller companies
can take loan from their family members and friends in small
amount.

Companies can meet their funds needs from above alternatives, they can determine the cost of capital by knowing the rate of interest or cost of fund for a particular alternative, if company goes for two alternatives, it can provide the weight to the capital can calculate its weighted average cost of capital (WACC) to know the average cost of capital so that it can target its required rate of return higher than WACC.

Suppose that you are the treasurer of a small but rapidly
growing multinational firm. What argument would you use to convince
the Board of Directors that tax considerations must be incorporated
in the firm's overall strategy?

Buckstars Inc. is a rapidly growing exotic herb company. The
firm expects to pay its first dividend of $3.60 per share 4 years
from today and management then expects to grow the dividend at 29%
for 3 years. As competition enters the market, dividend growth
after that will drop to 5% forever. If the appropriate discount
rate is 10%, what is the share price today? Solve
in excel and round your final answer to 2 decimal places.

Lowes Inc is a new firm in a rapidly growing industry. The
company is planning on increasing its annual dividend by 20% a year
for the next four years and then decreasing the growth rate to 5%
per year. The company just paid its annual dividend in the amount
of $1.00 per share. What is the current value of one share if the
required rate of return is 9.25%?
A. $35.63B. $38.19C. $41.05D. $43.19E. $45.81

The Bell Weather Co is a new firm in a rapidly growing industry.
The company is planning on increasing its annual dividend by 31% a
year for the next 4 years and then decreasing the growth rate to 3%
per year. The company just paid its annual dividend in the amount
of $3.30 per share. What is the current value of one share of this
stock if the required rate of return is 8.80%?
-I think the answer is 144.6...

The Newton Co. is a new firm in a rapidly growing industry. The
company is planning on increasing its annual dividend by 15% a year
for the next four years (Year 1, Year 2, Year 3, and Year 4) and
then increase at the constant growth rate of 5% per year
indefinitely. The company just paid its annual dividend in the
amount of $1.50 per share. What is the current value of Newton
Co.’s stock if the required rate of...

Combined Communications is a new firm in a rapidly growing
industry. The company is planning on increasing its annual dividend
by 23 percent a year for the next 4 years and then decreasing the
growth rate to 5 percent per year. The company just paid its annual
dividend in the amount of $1.30 per share. What is the current
value of one share of this stock if the required rate of return is
9.00 percent?

The Bell Weather Co. is a new firm in a rapidly growing
industry. The company is planning on increasing its annual dividend
by 19 percent a year for the next 4 years and then decreasing the
growth rate to 3 percent per year. The company just paid its annual
dividend in the amount of $2.60 per share. What is the current
value of one share of this stock if the required rate of return is
8.10 percent?

1.
The Bell Weather Co. is a new firm in a rapidly growing
industry. The company is planning on increasing its annual dividend
by 17 percent a year for the next 4 years and then decreasing the
growth rate to 6 percent per year. The company just paid its annual
dividend in the amount of $2.40 per share. What is the current
value of one share of this stock if the required rate of return is
7.90 percent?
$199.31
$185.11...

A rapidly growing firm is currently paying a dividend of $90.
The dividend growth rate is expected to be 12% for the next 6
years. The dividend growth rate after the first 6 years is expected
to be 3% annually. The expected return on the market is 8%, the
risk free rate is 3% and the firm’s Beta is 25.
Calculate the estimated price (intrinsic value) for a share of
this firm’s stock.
What does this firm’s Beta measure?
Use...

As CFO of a small manufacturing firm, you have been asked to
determine the best financing for the purchase of a new piece of
equipment. The vendor is offering repayment options of $10,000 at
the end of each year for five years, or no payment for two years
followed by one payment of $45,000. The current market rate of
interest is 10%. Calculate present value of both options.(For calculation purposes, use 5 decimal places as
displayed in the factor table...

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