Extra Flashcards
Capital structure
mix of long and short term debt to finance a project
what happens to bond prices as IR increases?
decreases
bonds with specific maturity’s and ytm with highest risk
long t, low ytm
bond price risk is also called
interest rate risk
a coupon is a what payment?
int
bonds or shares riskier
shares
speculative or investment bonds have a lower default risk rate
investment
common shares and preference shares
preference shares paid 1st, fixed, no voting rights, infinite
common shares paid 2nd, not fixed, voting rights if company doing well
bond or shares fixed time period
bonds
if intrinsic value is < market value
overvalued, sell
tax savings using cd, atcd
cd-atcd
tax savings comes from the ability to __- which
minus dep which decreases EBIT (taxable income)
D to E ratio
D/E
leverage affects tax rate?
no
leverage magnifies
variability in net income for shareholders
