If the economy continues to be strong, Carson Company may need to increase its production capacity by about 50% over the next few years to satisfy demand. It would also need financing to expand and accommodate the increase in production. The yield curve is currently upward sloping. Now, Carson is concerned about a possible slowing of the economy because of the potential actions of the Bangko Sentral ng Pilipinas (BSP) to reduce inflation. It is also considering issuing stock or bonds to raise funds in the next year. a. If Carson issued stock now, it would have the flexibility to obtain more debt and would also be able to reduce its cost of financing with debt. Why? b. Explain why institutional investors, such as mutual funds and pension funds, that invest in stock for long-term periods (at least a year or two) might prefer to invest in initial public offerings than to purchase other stocks that have been publicly traded for several years. c. Given that institutional investors such as insurance companies, pension funds, and mutual funds are the major investors during initial public offerings (IPOs), explain how each entity sources its funds to be able to participate in the IPOs?
If the economy continues to be strong, Carson Company may need to increase its production capacity by about 50% over the next few years to satisfy demand. It would also need financing to expand and accommodate the increase in production. The yield curve is currently upward sloping. Now, Carson is concerned about a possible slowing of the economy because of the potential actions of the Bangko Sentral ng Pilipinas (BSP) to reduce inflation. It is also considering issuing stock or bonds to raise funds in the next year. a. If Carson issued stock now, it would have the flexibility to obtain more debt and would also be able to reduce its cost of financing with debt. Why? b. Explain why institutional investors, such as mutual funds and pension funds, that invest in stock for long-term periods (at least a year or two) might prefer to invest in initial public offerings than to purchase other stocks that have been publicly traded for several years. c. Given that institutional investors such as insurance companies, pension funds, and mutual funds are the major investors during initial public offerings (IPOs), explain how each entity sources its funds to be able to participate in the IPOs?
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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If the economy continues to be strong, Carson Company may need to increase its production capacity by about 50% over the next few years to satisfy demand. It would also need financing to expand and accommodate the increase in production. The yield curve is currently upward sloping. Now, Carson is concerned about a possible slowing of the economy because of the potential actions of the Bangko Sentral ng Pilipinas (BSP) to reduce inflation. It is also considering issuing stock or bonds to raise funds in the next year.
a. If Carson issued stock now, it would have the flexibility to obtain more debt and would also be able to reduce its cost of financing with debt. Why?
b. Explain why institutional investors, such as mutual funds and pension funds, that invest in stock for long-term periods (at least a year or two) might prefer to invest in initial public offerings than to purchase other stocks that have been publicly traded for several years.
c. Given that institutional investors such as insurance companies, pension funds, and mutual funds are the major investors during initial public offerings (IPOs), explain how each entity sources its funds to be able to participate in the IPOs?
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