International Financial Management
14th Edition
ISBN: 9780357130698
Author: Madura
Publisher: Cengage
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“Because corporations do not actually raise any funds in secondary markets, they are less important to the economy than primary markets.” Comment.
Because corporations do not actually raise any funds in markets, they are less important to the economy than primary markets. Comment
Discuss the factors that affect the WACC. Also discuss how these factors may differ somewhat from country to country. For example, if a company has a stronger balance sheet than other companies in its industry, investors will likely be willing to accept a lower interest rates on its bonds and this will lower the company’s overall cost of capital.
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- Venture capital (VC) firms are pools of private capital that typically invest in small, fast-growing companies, which usually can’t raise funds through other means. In exchange for this financing, the VCs receive a share of the company’s equity, and the founders of the firm typically stay on and continue to manage the company. Describe the nature of the incentive conflict between VCs and the managers, identifying the principal and the agent. VC investments have two typical components: (1) managers maintain some ownership in the company and often earn additional equity if the company performs well; (2) VCs demand seats on the company’s board. Discuss how these two components help address the incentive conflict.arrow_forwardWith a decline in the number of publicly traded companies and the growth of other investment vehicles such as private equities, hedge funds, junk bonds, etc., some people claim that the investment world is becoming more and more unfair towards smaller investors since most of the alternative investment vehicles are only available to institutions or high-net-worth individuals. Do you agree or disagree with this claim?arrow_forwardSince the cost of funds can vary among markets, the MNC's access to the international capital markets may allow it to Group of answer choices attract funds at a higher cost than that paid by domestic firms. attract funds at a lower cost than that paid by domestic firms. it should make no impact.arrow_forward
- a. What are the risks and rewards of investing in the stock market as compared to the bond market?b. “Because corporations do not actually raise any funds in secondary markets, they are less important to the economy than primary markets.” Comment.arrow_forwardBecause corporations do not actually raise any funds in secondary markets, they are less important to the economy than primary markets.”arrow_forwardWhat is the important question of corporate finance when a finance manager advises the company’s management to accept or reject a long-term investment project? What the finance manager needs to analyse to justify her/his adviceHow a corporation is different from a partnership in terms of owner, legal status, liabilities, life, regulation, access to capital, taxation and transfer?arrow_forward
- One drawback of ETFs is that investors: a) are forced to pay higher cost and fee as compared to mutual funds. b) are not able to diversify their investments. C) must pay commission when making a purchase. d) can only buy or sell shares after the major stock exchanges are closed.arrow_forwardDiscuss Mark 10:23-25 and its application to capital rationing and maximizing shareholder wealth. Capital rationing could affect the returns to shareholders. An ethical dilemma is faced by the executives of the business. Capital rationing could affect the stakeholders (other than the shareholder) of the business. Should capital constraints modify the principle of maximizing shareholder wealth?arrow_forwardAll the following statements are incorrect about international equity markets except? a. In the international equity market, corporations cannot raise capital through IPOs, instead they can raise capital by trading in the secondary market. b. In the international equity market, corporations can easily manipulate the price of the shares since it is not regulated by any regulatory bodies. c. In the international equity market, corporations can only sell blocks of shares to Institutional investors from European Union. d. In the international equity market, corporations can sell blocks of shares to investors in a number of different countries simultaneously.arrow_forward
- Why investors are willing to invest in high-tech firms instead of conventional financial sources?arrow_forwardWhy would so many people invest in a company like AFCO? What could investors have done to prevent themselves from falling into investment schemes such as this?arrow_forwardWhich of the following does NOT refer to the ways of how a multinational company can reduce political risk? Taking a conservative approach to investment and adjusting NPV of the project by reducing expected cash flows or by increasing the cost of capital in accordance with existing trends. Purchasing insurance policy against political risks. Acquiring minor shares in foreign corporations. Creating a joint venture with local partners or a consortium with other multinational companies.arrow_forward
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