Instruction 8.1: For the Following Problem(s), Consider These Debt Strategies Being Considered

question 12

Multiple Choice

Instruction 8.1:
For the following problem(s) , consider these debt strategies being considered by a corporate borrower. Each is intended to provide $1,000,000 in financing for a three-year period.
• Strategy #1: Borrow $1,000,000 for three years at a fixed rate of interest of 7%.
• Strategy #2: Borrow $1,000,000 for three years at a floating rate of LIBOR + 2%, to be reset annually. The current LIBOR rate is 3.50%
• Strategy #3: Borrow $1,000,000 for one year at a fixed rate, and then renew the credit annually. The current one-year rate is 5%.
-Refer to Instruction 8.1. After the fact, under which set of circumstances would you prefer strategy #1? (Assume your firm is borrowing money.)

• A) Your credit rating stayed the same and interest rates went up.
• B) Your credit rating stayed the same and interest rates went down.
• C) Your credit rating improved and interest rates went down.
• D) Not enough information to make a judgment.

Recognize the significance of strategic leadership and corporate governance in the execution of business strategies.

Differentiate between various business strategies such as cost leadership, differentiation, and focus strategies.

Identify the critical issues and challenges in strategic planning and implementation.

Understand the role of corporate governance in strategic management and its impact on organizational success.

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Definitions:

Respondent Behavior

Responses made to or elicited by specific environmental stimuli.

Operant Conditioning

The procedure by which a change in the consequences of a response will affect the rate at which the response occurs.

Fixed-Interval Reinforcement

A schedule in operant conditioning where a response is rewarded only after a specified amount of time has elapsed.

Internal Forces

Psychological or emotional factors originating within an individual that influence thoughts, feelings, and behaviors.