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Stockholders can eliminate the risk of volatile cash flows by diversifying their portfolios. Risk management allows firms to have greater debt capacity, which has a larger tax shield of interest payments. Firms can reduce borrowing costs by using interest rate swaps.
Stockholders can eliminate the risk of volatile cash flows by diversifying their portfolios. Risk management allows firms to have greater debt capacity, which has a larger tax shield of interest payments. Firms can reduce borrowing costs by using interest rate swaps.
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Stockholders can eliminate the risk of volatile cash flows by diversifying their portfolios. Risk management allows firms to have greater debt capacity, which has a larger tax shield of interest payments. Firms can reduce borrowing costs by using interest rate swaps.
Copyright:
Attribution Non-Commercial (BY-NC)
Formati disponibili
Scarica in formato PPT, PDF, TXT o leggi online su Scribd
probability of occurrence of adverse events. Take actions to reduce the magnitude of the loss associated with adverse events. Avoid the activities that give rise to risk.
the risk inherent in the financial markets due to price fluctuations. Example: A firm holds a portfolio of bonds, interest rates rise, and the value of the bonds falls.
payment obligations between two parties, usually because each party prefers the terms of the other’s debt contract. Swaps can reduce each party’s financial risk.
futures contract will allow a firm to make a future purchase of the input at today’s price, even if the market price on the item has risen substantially in the interim.
risk inherent in the financial markets due to price fluctuations. Example: A firm holds a portfolio of bonds, interest rates rise, and the value of the bonds falls.