EBK FUNDAMENTALS OF CORPORATE FINANCE
9th Edition
ISBN: 8220103675925
Author: BREALEY
Publisher: YUZU
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Question
Chapter 2, Problem 1QP
Summary Introduction
To discuss: About the financing sources of small private firms and give three examples also.
Expert Solution & Answer
Explanation of Solution
The small private firms can raise funds through only financial markets for their capital investment. The different sources of finance for a small private firm can be classified in to equity or debt financing.
Equity financing is a process of selling company stock to investors for raising capital. In which a part of ownership is vested in the hands of shareholders. Debt financing means selling debt instrument to individuals or institutions for working capital or capital expenditure requirements.
Sources of finance for the small business are the following:
- Own capital
- Small business loans
- Trade credit
- Banks
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Suppose that you are a U.S.-based importer of goods from the United Kingdom. You expect the value of the pound to increase against the U.S. dollar over the next 30 days. You will be making payment on a shipment of imported goods in 30 days and want to hedge your currency exposure. The U.S. risk-free rate is 5.5 percent, and the U.K. risk-free rate is 4.5 percent. These rates are expected to remain unchanged over the next month. The current spot rate is $1.90.
1.Move forward 10 days. The spot rate is $1.93. Interest rates are unchanged. Calculate the value of your forward position. Do not round intermediate calculations. Round your answer to 4 decimal places.
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Chapter 2 Solutions
EBK FUNDAMENTALS OF CORPORATE FINANCE
Ch. 2 - Prob. 1QPCh. 2 - Financial Markets. The stock and bond markets are...Ch. 2 - Financial Markets and Institutions. True or false?...Ch. 2 - Prob. 4QPCh. 2 - Prob. 5QPCh. 2 - Financial Intermediaries. Is an insurance company...Ch. 2 - Prob. 7QPCh. 2 - Prob. 8QPCh. 2 - Prob. 9QPCh. 2 - Liquidity. Securities traded in active financial...
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