When a Corporation Must Get External Financing, the First Place

question 3

Essay

When a corporation must get external financing, the first place to look for funds is with debt.There are various reasons for this preference.List the reasons why debt is generally issued first.

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Definitions:

Shareholder Wealth

The overall value of an investment in a company held by its shareholders, often measured by stock price appreciation and dividends.

Average Return

The simple mathematical average of a series of returns generated over a period of time.

NPV Technique

A method used in capital budgeting to evaluate the profitability of an investment or project, by calculating the net present value of all cash flows associated with it.

Mutually Exclusive

Events or choices that cannot occur or be taken at the same time.