1) It’s considered a high risk of investment when Symonds electronics decide to take a debt in the investment. This issue occurs because normally banks or other parties who provide debts are normally very restricted about their money because they wanted to eliminate any kind of the probability of loss of income. In addition, the debt can be out of control due to market circuimstances and lack of leadership and management.
2) Homemade leverage is the concept of how people leverage themselves in borrowing and lending in the same product as a corporation. People can have the ability to duplicate the effects of corporate leverage on their own. It can be approached when individuals borrow on the same terms as a company; they can get the same affects of corporate leverage on their own.
Homemade leverage can be used by shareholders to create the same payoffs (with taxes).
VL = VU + TC B It’s considered when the firm paid off its debt to shareholders, and then shareholder pays the same amount of payoffs to the brokers.
3) WACC is the average of the costs of all the sources available, it’s calculated by considering the…show more content… Our target is to find a balance between the debt and equity that help in achieving the satisfying amount value of shareholders. While This balance can be like if the company cannot afford to pay debt then it will have to minimize debt and finance through equity. In the other hand, applying the homemade leverage will reduce the risk of loss of firm income, failure or bankruptcy.
7) Most important issues have to be considered when increasing the leverage Can be summarized to the ability for covering the payment, borrowed money amount, long term and short term leverage and the interest