Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Concept explainers
Debenture Valuation
A debenture is a private and long-term debt instrument issued by financial, non-financial institutions, governments, or corporations. A debenture is classified as a type of bond, where the instrument carries a fixed rate of interest, commonly known as the ‘coupon rate.’ Debentures are documented in an indenture, clearly specifying the type of debenture, the rate and method of interest computation, and maturity date.
Note Valuation
It is the process to determine the value or worth of an asset, liability, debt of the company. It can be determined by many processes or techniques. Many factors can impact the valuation of an asset, liability, or the company, like:
Question

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26 - 27. Total assets is 100,000. Total debt is 50,000. What is the debt-to-equity ratio?
28 29. (Average/Difficult) If the pro forna balance sheet shows that total asset increase by
PHP400,000 while retaining a debt-equity ratio of .75 then:
A. debt must increase by PHP300,000.
B. equity must increase by the ful PHPH400,000.
C. debt must increase by PHP171,428.
D. equity must increase by PHP100,000.
24,012.0
18.2840
30 - 34. What is a good capital structure? Are low debt ratios aiways favorable?
35 – 40. In starting a business, is it okay to siart with having debt during the early stages? What
dictates the company's choice of leverage structure?
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