Flow of Funds Exercise Roles of Financial Markets and Institutions e interactions ofa expects that it will need substantial lo ng-term fnanan single manufacturing firm (Carson Company) in the and plans to borrow additional funds either through financial loans or by issuing bonds. It is also considering issu ts continuing exercise ocuses on th markets, It illustrates how financial markets ud institutions are integrated and facilitate the flow of ing stock to raise funds in the next year. Carson closely funds in the business and financial environment. At the monitors conditions in financial markets that could end of every chapter, this exercise provides a list of quesaffect its cash inflows and cash outflows and therefore tions about Carson Company that require the application affect its value of concepts presented in the chapter, as they relate to the tlow of funds. b. In what way is Carson a deficit unit? Carson Company is a large manufacturing firm in . How might finance companies facili California that was created 20 years ago by the Carson expansion? family. It was initially tinanced with an equity invest d. How might commercial banks facilitate Carson's ment by the Carson family and 10 other individuals. cxpansion: Over time, Carson Company has obtained substantial . Why might Carson have limited access to addi loans from tinance companies and commercial banks. The interest rate on the loans is tied to market inter est rates and is adjusted every six months. Thus, Car tional debt financing during its growth phase? How might investment banks facilitate Carson's ex pansion f. son's cost of obtaining funds is sensitive to interest rate How might Carson use the primary market to facil itate its expansion? . movements. It has a credit line with a bank in case it suddenly needs additional funds for a temporary pe riod. It has purchased Treasury securities that it could h. How might it use the secondary market? . If financial markets were pertect, how might this sell if it experiences any liquidity problems have allowed Carson to avoid financial institutions The loans provided by commercial banks to Carso require that Carson receive the banks' approval be fore pursuing any large projects. What is the pur pose of this condition? Does this condition benefit Carson Company has assets valued at about $50 j. million and generates sales of about $100 million per year. Some of its growth is attributed to its acquisitions of other firms. Because of its expectations of a strong U.S. economy, Carson plans to grow in the future by