plz answer correctly
AB LLC needs $20,00.000 for expansion the expansion is expected to yield an annual EBIT $320000 In choosing a financial plan AB LLC has an objective of maximizing the earnings per share. It is considering the possibility of raisıng the debt of a) $200000 b) S 800000 e) S1200000 and the balance of Equity share Debt will carry 8%% interest Assume a tax rate is 50% Face value of each equity share is S10 Choose the best.
Answers
Answer:
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Explanation:
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Answer:
The decision to acquire a new and modern plant to upgrade an old one is an Investment decision. Investment decision refers to the decision regarding where the funds are to be invested so as to earn the highest possible return. The decision to acquire a new plant is a long term investment decision and affects long run working and earning capacity of the business.
On the other hand, working capital decisions refer to those investment decisions that influence the day to day working of the business. While, financing decision refers to the decisions regarding the sources from where the funds can be raised.
Explanation:
The cheapest source of finance is retained earnings. Retained income refers to that portion of net income or profits of an organisation that it retains after paying off dividends. An organisation can reinvest its retained earnings or profits for the purpose expansion, modernisation, etc. It neither involves any fund raising cost nor any risk. Also, unlike other sources of finance it does not involve any obligation in terms of repayment.