Credit cards are not suitable sources of long-term funding for start-up companies
Indicate whether the statement is true or false
TRUE
Explanation: Although credit cards are a convenient form of short-term borrowing, interest rates tend to be much higher than those of other types of funding, such as lines of credit. High credit card interest rates could cause a business owner to accumulate too much debt, putting the business at risk of failing. Therefore, credit cards should be used only if a business owner can pay the balance completely every month.
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Water transportation is rated "low" in reliability since approximately 200 freighters sink due to bad weather or other factors
Indicate whether the statement is true or false
Fury Motor Corp is all equity financed and generates perpetual annual EBIT of $300. Assume that the EBIT, and all other cash flows, occur at year end and that we are currently at the beginning of a year
Assume that Fury has a 100% payout rate, 1,500 shares outstanding, and that shareholders require a return of 5%. Assume that the tax rate is 0%. Fury Motor Corp is considering an open market stock repurchase. It plans to buy 20% of its outstanding shares at the price of $4.00 per share. The repurchased shares will be cancelled. It will finance the repurchase by issuing perpetual bonds with a coupon rate (and yield) of 3%. Assume that the tax rate is 0%. If Fury Motor Corp goes ahead with the repurchase, then what is the stock price after the repurchase is complete? A) $3.00 B) $3.50 C) $4.00 D) $4.50 E) $5.00