1. which of the following is the ultimate advantage of debt-financing when a business borrows to acquire its necessary assets (capital)?

Borrowing is always an easier option to obtain necessary cash.

Because interests are paid out as an expenses, the management of the corporation does not have to explain the use of it to its shareholders

The firm can provide higher return to its owners, in most cases, even after paying the interests as long as the borrowed funds are used efficiently.

Creditors are more generous (patient) because their investments (loan) will always be paid back.

2. Which of the following is considered a financing decision?

Purchasing common stocks of other company for future gains when the price (of the common stocks purchased) goes up.

Buying Federal Government's bonds at a cheap price to receive higher interests.

Issuing (selling) common stocks of its own to obtain necessary cash.

Adjusting the price of its product to increase future revenues.

3. You would like to save $20,000 in total at the end of the third (3rd) year from now. A local business person (who you think is honest and reliable) gave you an attractive offer of 7% annual growth if you make an investment now. If this offer works out, what amount should you put in now?