Analytical Question: China Eastern, headquartered in Shanghai, needs US $5,000,000 for one year to finance working capital. The airline has two alternatives for borrowing: a. Borrow US$5,000,000 in eurodollars in London at 7.25% per annum. b. Borrow HK $39,000,000 in Hong Kong at 7.00% per annum, and exchange these Hong Kong dollars at the present exchange rate of HK$7.8/US$ for U.S. dollars. At what ending exchange rate would China Eastern be indifferent between borrowing U.S. dollars and borrowing Hong Kong dollars? Show your calculation and discuss.
Cost of Debt, Cost of Preferred Stock
This article deals with the estimation of the value of capital and its components. we'll find out how to estimate the value of debt, the value of preferred shares , and therefore the cost of common shares . we will also determine the way to compute the load of every cost of the capital component then they're going to estimate the general cost of capital. The cost of capital refers to the return rate that an organization gives to its investors. If an organization doesn’t provide enough return, economic process will decrease the costs of their stock and bonds to revive the balance. A firm’s long-run and short-run financial decisions are linked to every other by the assistance of the firm’s cost of capital.
Cost of Common Stock
Common stock is a type of security/instrument issued to Equity shareholders of the Company. These are commonly known as equity shares in India. It is also called ‘Common equity
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