Suppose Alex would like to use $8,000 of his savings to make a financial investment.One way of making a financial investment is to purchase stock or bonds from a private company.finance. Buying a bondSuppose NanoSpeck, a biotechnology firm, is selling bonds to raise money for a new lab-a practice known asIssued by NanoSpeck would give Alexthe firm. In the event that NanoSpeck runs into financial difficulty,will be paid first.Suppose instead Alex decides to buy 100 shares of NanoSpeck stock.Which of the following statements are correct? Check all that apply.O An increase in the perceived profitability of NanoSpeck will likely cause the value of Alex's shares to rise.ONanoSpeck earns revenue when Alex purchases 100 shares, even if he purchases them ftrom an existing shareholder.The Dow Jones Industrial Average is an example of a stock exchange where he can purchase NanoSpeck stock.higherAlternatively, Alex could make a financial Investment by purchasing bonds issued by the government of Japan.lowerInterest rateAssuming that everything else is equal, a bond issued by a government that is engaged in a civir war most likely pays athan a bond issued by the government of Japan.

For the purpose of making investments, alternatives that can be used are: Purchase of shares of…

Answered: Suppose Alex would like to use $8,000…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Alex is an investor and he wants to make an investment of $500,000 in to your VR/AR Headset manufacturing company which is operating really well in big cities in India and he wants to bring it into international market. To make sure risk to his investment is minimal. Alex wants advice on: a. The options available for investing in your business. b. The process Involved with each form of investment. c. The risks and benefits associated with each form of investment.
Your client Ben is in his late 30s (married, with two kids) and working as a full-time doctor in ZZ hospital. He deposited all this money in the bank, but the interest rate is decreasing all the time. He heard that the return of stock investment is much higher. As he knows one medicine company very well, he plans to open a stock account and invest all his money in that company first. Subsequently as he gets to know other medicine companies, he planned to diversify his portfolio into those companies. Appraise Ben’s investment plan.
Fred Jackson, president and owner of Bailey Company, is concerned about the company's ability to obtain a loan from a major bank. The loan is a key factor in the firm's plan to expand its operations. Demand for the firm's product is high—too high for the current production capacity to handle. Fred is convinced that a new plant is needed. Building the new plant, however, will require an infusion of new capital. Fred calls a meeting with Karla Jones, financial vice president. Fred: Karla, what is the status of our loan application? Do you think that the bank will approve? Karla: Perhaps, but at this point, there is a real risk. The loan officer has requested a complete set of financials for this year and the past 2 years. He has indicated that he is particularly interested in the statement of cash flows. As you know, our income statement looks great for all 3 years, but the statement of cash flows will show a significant increase in receivables, especially for this year. It will also…
If you had a large sum of money to invest, would you make the investments yourself and then make your own trades, or would you hire an investment broker or money manager?
Radley Co. is growing its business and is currently deciding how to finance this programme. Following some research, the business decides that it can either (1) issue bonds and use the money to buy the necessary assets, or (2) lease the assets for an extended period of time. Please respond to the following questions without understanding the relative costs involved: a. What benefits might leasing the assets have over purchasing them? b. What drawbacks can leasing the assets have in comparison to buying them? c. How would leasing the assets vary from issuing bonds and buying the assets in terms of how it will impact the Statement of Financial Position?
In certain scenerios, some companies may choose to finance with a bank loan specifically because of the deductibility of interest. It could lower their taxable income enough (assuming it is not a corporation at the current 21% flat rate) to put them in a lower tax bracket. This means they could end up paying less money after interest and taxes are paid. It is interesting that bank interest could be utilized as a cash flow strategy! Do you think this is something many finance managers may consider?
Provide an analysis of how the following investment patterns can be explained using theories of behavioral finance. A loan approver is considering a mortgage application. There are two possible scenarios: Scenario A: the loan approver has approved three mortgage applications in a row earlier today. Scenario B: the loan approver has approved two mortgage applications and rejected another one earlier today. Researchers find that the probability for the loan approver to reject the current mortgage applicationin scenario A is higher than that in scenario B.
You are an entrepreneur starting a biotechnology firm. If your research is successful, the technology can be sold for $30 million. If your research is unsuccessful, it will be worth nothing. To fund your research, you need to raise $2 million. Investors are willing to provide you with $2 million in initial capital in exchange for 50% of the unlevered equity in the firm. What is the total value of the firm without leverage?
Harry, a friend of yours, is taking a course in economics, and has become confused by some of the terminology because of the way people commonly use the same words. The economics professor says investment occurs when companies buy equipment and build factories. Yet Harry has always heard people talk about investing as a method of saving when they put money in the bank or purchase securities. He's confused by these dissimilar uses of the word, and has asked you to explain. After asking for your help, Harry happily states that there's one thing he does understand perfectly about what the econ prof says, and that is "savings equals investment." Since investing in stocks and bonds is also saving money, it's obvious that savings equals investment! Write a brief explanation to help Harry out.
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The Case:Hassan Mustafa has recently started his new job as a financial manager in a firm called ScanSoft. ScanSoft is developing a new process to manufacture optical disks. The development costs were higher than expected, so ScanSoft requires an immediate cash inflow of $5,200,000. To raise the required capital, the company decided to issue bonds. Since ScanSoft had no expertise in issuing and selling bonds, Hassan suggested that the company work with an investment dealer. The investment dealer bought the company's entire bond issue at a discount, and then planned to sell the bonds to the public at face value or the current market value. To ensure it would raise the $5,200,000 it required, ScanSoft plans to issue 5200 bonds with a face value of $1000 each, on January 20, 2021. Interest is paid semi-annually on July 20 and January 20, beginning July 20, 2021. The bonds pay interest at 5.5% compounded semi- annually.Hassan Mustafa realized that when the bonds mature on January 20, 2041,…

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