The capital allocation process involves the transfer of capital among different entities that include individuals, small businesses, banks, financial intermediaries, companies, mutual funds, and other market participants. In a developed market economy, capital flows freely between entities that want to supply capital to those who want it. This flow of capital can be classified in three ways. In the table below, identify the nature of capital transfer given in the scenario with its appropriate classification: Scenario Direct Transfers Indirect Transfers through Investment Banks Indirect Transfers through Financial Intermediaries Elliot invests $25,000 by purchasing 1,000 shares of an emerging markets mutual fund. This mutual fund invests in companies in Brazil, India, and China. He bought the mutual fund from the mutual fund company. Steve’s grandfather loans him $30,000 to start a small coffee shop in the East Village in Manhattan. A small startup firm has each of the partners contribute $50,000 in capital to help the company make payroll for the next three months. xEdu.com is an early-stage start-up company that plans to issue its first public common stock—called an initial public offering (IPO)—in six months. It hires an investment bank to underwrite the issue.
The capital allocation process involves the transfer of capital among different entities that include individuals, small businesses, banks, financial intermediaries, companies, mutual funds, and other market participants. In a developed market economy, capital flows freely between entities that want to supply capital to those who want it. This flow of capital can be classified in three ways. In the table below, identify the nature of capital transfer given in the scenario with its appropriate classification: Scenario Direct Transfers Indirect Transfers through Investment Banks Indirect Transfers through Financial Intermediaries Elliot invests $25,000 by purchasing 1,000 shares of an emerging markets mutual fund. This mutual fund invests in companies in Brazil, India, and China. He bought the mutual fund from the mutual fund company. Steve’s grandfather loans him $30,000 to start a small coffee shop in the East Village in Manhattan. A small startup firm has each of the partners contribute $50,000 in capital to help the company make payroll for the next three months. xEdu.com is an early-stage start-up company that plans to issue its first public common stock—called an initial public offering (IPO)—in six months. It hires an investment bank to underwrite the issue.
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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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
Question
Capital allocation process
The capital allocation process involves the transfer of capital among different entities that include individuals, small businesses, banks, financial intermediaries, companies, mutual funds, and other market participants. In a developed market economy, capital flows freely between entities that want to supply capital to those who want it. This flow of capital can be classified in three ways. In the table below, identify the nature of capital transfer given in the scenario with its appropriate classification:
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Scenario
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Direct Transfers
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Indirect Transfers through Investment Banks
|
Indirect Transfers through Financial Intermediaries
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|---|---|---|---|---|
| Elliot invests $25,000 by purchasing 1,000 shares of an emerging markets mutual fund. This mutual fund invests in companies in Brazil, India, and China. He bought the mutual fund from the mutual fund company. |
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| Steve’s grandfather loans him $30,000 to start a small coffee shop in the East Village in Manhattan. |
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| A small startup firm has each of the partners contribute $50,000 in capital to help the company make payroll for the next three months. |
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| xEdu.com is an early-stage start-up company that plans to issue its first public common stock—called an initial public offering (IPO)—in six months. It hires an investment bank to underwrite the issue. |
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