Examlex
If investors' aversion to risk rose, causing the slope of the SML to increase, this would have a greater impact on the required rate of return on equity, rs, than on the interest rate on long-term debt, rd, for most firms.Other things held constant, this would lead to an increase in the use of debt and a decrease in the use of equity.However, other things would not stay constant if firms used a lot more debt, as that would increase the riskiness of both debt and equity and thus limit the shift toward debt.
Interest
The payment made for the use of (borrowed) money.
Supply of Loanable Funds
The total amount of funds available for borrowing in the economy, determined by savings and influenced by interest rates.
Perfectly Elastic
Describes a situation in demand or supply where quantity changes by an infinite amount in response to any change in price.
Economic Profits
The difference between total revenues and total costs, including both explicit and implicit costs, representing the surplus generated from business operations beyond the normal returns.
Q3: Stock X has a beta of 0.6,
Q7: Dyer Furniture is expected to pay a
Q9: If a company's free cash flows are
Q26: VR Corporation has the opportunity to
Q27: Carby Hardware has an outstanding issue of
Q29: Which of the following statements is CORRECT?<br>A)
Q56: Wiley's Wire Products is considering a
Q73: Which of the following statements is CORRECT?<br>A)
Q85: Refer to the data for Eccles Incorporated.What
Q85: A company is expected to have free