Question

What happens to a firm’s marginal cost of capital as it expands in an illiquid market?...

What happens to a firm’s marginal cost of capital as it expands in an illiquid market? How can it overcome these difficulties?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

I have answered the question below

Please up vote for the same and thanks!!!

Do reach out in the comments for any queries

Answer:

The marginal cost of capital stays flat for a longer range of raising new capital when the market experience a phase of illiquidity. From an organization perspective, an illiquid market is one in which it is difficult to raise new capital because there are insufficient buyers for a reasonably sized offering.

The companies can overcome these difcculties experienced in times of illiquid period by following a proactive strategy to internationalize their cost and availability of capital.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Given the following information, what is the firm’s weighted average cost of capital? Market value of...
Given the following information, what is the firm’s weighted average cost of capital? Market value of equity = $30 million; market value of debt = $30 million; cost of equity = 15%. The firm’s bond issue sells for $1075. The coupon rate is 7%, the bonds mature in 20 years, and interest is paid annually. The tax rate is 40% A) 9.4% B) 10.6% C) 11% D) 15% E) 22%
Show what happens to the firm’s optimal level of capital after a decrease in productivity. Sketch...
Show what happens to the firm’s optimal level of capital after a decrease in productivity. Sketch the impact on the investment demand curve.
Suppose that the cost of renting capital increases.  What happens to the profit maximizing amount of labor...
Suppose that the cost of renting capital increases.  What happens to the profit maximizing amount of labor chosen by the firm?  Show using the firm’s optimal choice of labor graph.
16) In the short-run cost analysis, when a firm’s marginal cost (MC) is unavailable, the best...
16) In the short-run cost analysis, when a firm’s marginal cost (MC) is unavailable, the best alternative of MC is its a) average total cost (ATC) b) average fixed cost (AFC) c) total variable cost (TVC) d) average variable cost (AVC) 19) Which of the following is NOT a market characteristic for monopoly? a) One firm is the only supplier of a product. b) Entry into the market is blocked. c) The firm can influence market price though output decision-making....
What happens along the average total cost curve as: a) Marginal product is increasing? b) Marginal...
What happens along the average total cost curve as: a) Marginal product is increasing? b) Marginal cost is decreasing? c) Average variable costs are decreasing? d) Total product increases at a decreasing rate?
The market demand curve is P = 90 − 2Q, and each firm’s total cost function...
The market demand curve is P = 90 − 2Q, and each firm’s total cost function is C = 100 + 2q2. Suppose there is only one firm in the market. Find the market price, quantity, and the firm’s profit. Show the equilibrium on a diagram, depicting the demand function D (with the vertical and horizontal intercepts), the marginal revenue function MR, and the marginal cost function MC. On the same diagram, mark the optimal price P, the quantity Q,...
10. Adjusting the cost of capital for risk Divisional Costs of Capital A firm’s cost of...
10. Adjusting the cost of capital for risk Divisional Costs of Capital A firm’s cost of capital is often a reflection of its activities and funding needs. Consider the case of Wizard Company, and answer the following questions: Wizard Co. currently has only a real estate division and uses only equity capital; however, it is considering creating consulting and distribution divisions. Its beta is currently 1.3. The risk-free rate is 3.1%, and the market risk premium is 6.4%. This means...
9. Adjusting the cost of capital for risk Divisional Costs of Capital A firm’s cost of...
9. Adjusting the cost of capital for risk Divisional Costs of Capital A firm’s cost of capital is often a reflection of its activities and funding needs. Consider the case of Wizard Company, and answer the following questions: Wizard Co. currently has only a real estate division and uses only equity capital; however, it is considering creating consulting and distribution divisions. Its beta is currently 1.1. The risk-free rate is 2.8%, and the market risk premium is 6.7%. This means...
The cost of capital is affected by some factors that are under the firm’s control and...
The cost of capital is affected by some factors that are under the firm’s control and some that are not. What are the factors the firm can and cannot control and what will be the impact of these factors on companies average cost of capital (WACC)?
Suppose a firm’s production function is given by Q = L1/2*K1/2. The Marginal Product of Labor...
Suppose a firm’s production function is given by Q = L1/2*K1/2. The Marginal Product of Labor and the Marginal Product of Capital are given by: MPL = (K^1/2)/2L^1/2 & MPK = (L^1/2)/2K^1/2) a) (12 points) If the price of labor is w = 48, and the price of capital is r = 12, how much labor and capital should the firm hire in order to minimize the cost of production if the firm wants to produce output Q = 10?...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT