Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. company a saved 1 billion dollars internal cash in

Company A saved 1 Billion dollars internal cash in 2001 and 2002. Their debt to...

70.2K

Verified Solution

Question

Finance

image

Company A saved 1 Billion dollars internal cash in 2001 and 2002. Their debt to value ratio is around 40% in both 2001 and 2002. In order to finance a project in 2003, which costs 3 billion dollars, the company used 1 billion dollar internal cash. The company had 3 billion dollars internal cash before the project. The company's cost of debt is same as cost of using internal cash. The market value of company at the end of 2003 is 150 Billion dollars and market value of equity is 90 billion dollars. If you were told that the company is following pecking order theory, how would you evaluate company's decision in financing the new project? If you were told that the company is following trade of theory, how would you evaluate company's decision in financing the new project

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students