Why is it possible for the effective cost of long-term debt to exceed the cost of short-term

Question:

Why is it possible for the effective cost of long-term debt to exceed the cost of short-term debt, even when short-term interest rates are higher than long-term rates?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For book-img-for-question

Contemporary Financial Management

ISBN: 9780324289114

10th Edition

Authors: James R Mcguigan, R Charles Moyer, William J Kretlow

See More Books

Question Posted: Jul 17, 2012 04:13 AM

See More Questions

Why is it possible for a bird to sit on a high-voltage wire without being electrocuted?
Why is it possible for direct labor in process operations to include the labor of employees who do not work directly on products or services?
Why is it possible for a firm to pay an actuarially fair price for insurance and still have the insurance purchase be a positive-NPV investment?
Christine has three cars that must be overhauled by her ace mechanic, Megan. Given the following data about the cars, use least slack per remaining operation to determine Megans scheduling priority...
The Super Donut owns and operates six doughnut outlets in and around Kansas City. You are given the following corporate budget data for next year: Revenues $10,000,000 Fixed costs $ 1,700,000...
State briefly the primary rules for measuring work done on a construction site for purposes of cost accounting.
Think of a situation in your personal or professional life when you specifically used an indirect request to try to get what you wanted. Was it effective? What, in your opinion, is the power of an...
1. Using the rules of thumb for reducing the risks related to introducing an innovative new product, how well are Teal and Pate likely to do with the ElliptiGo? 2. What are the primary benefits and...
Emmett and Sierra formed a partnership dividing income as follows: Annual salary allowance to Emmett of $38,800 Interest of 8% on each partner's capital balance on January 1 Any remaining net income...
Midwest Home Furnishings Corporation (MHFC) manufactures a variety of housewares for the consumer market in the Midwest. The companys three major product lines are cooking utensils, tableware, and...
Describe the difference between permanent current assets and fluctuating current assets.
Describe the matching approach for meeting the financing needs of a company. What is the primary difficulty in implementing this approach?
You plan to finance a new car by borrowing $25,000. The interest rate is 7% p.a., compounded monthly. What is your monthly payment for a three-year loan, a four-year loan, and a five-year loan?
Winston Electronics reported the following information at its annual meetings. The company had cash and marketable securities worth $1,235,740, accounts payables worth $4,160,391, inventory of...
Hooray Company has been manufacturing 12,000 units of Part A which is used to manufacture one of its products. At this level of production, the cost per unit is as follows: Direct materials P 4.80...
At the beginning of the period, the Grinding Department budgeted direct labor of $171,200 and property tax of $57,000 for 10,700 hours of production. The department actually completed 12,800 hours of...
The following information is available for Shamrock Corporation for the year ended December 31, 2025. Beginning cash balance $ 58,500 Accounts payable decrease 4,810 Depreciation expense 210,600...
In today's stock market, compounding is the key to making money in the future for one's investments. However, with decentralized currency growing rapidly (Crypto), how can one rely on TVM for FV...
An importer deals only in one commodity and has recorded the following transactions for the first six months of the year. There was an opening balance atJanuary Ist of 50 units, valued at 12 500....
A 20-cm-square vertical plate is heated to a temperature of 30oC and submerged in glycerin at 10oC. Calculate the heat lost from both sides of the plate.
Nicotine increases ________ ________, which increases an exposed individuals risk of heart attack and stroke.
Your company paid employees who were eligible for work opportunity credit $25,000 last year. Of these wages, $21,000 is eligible for a tax credit of 40% of the wages. The remaining wages are eligible...
Your company spent $5,000 for building modifications to provide access required by the Americans with Disabilities Act. These expenditures are eligible for a tax credit of 50% of the cost of the...
A construction company has an estimated profit, before taxes, of $256,452 for the year. Included in the companys costs is $25,622 for meals and entertainment. Determine the taxable income for the...
The Regal Cycle Company manufactures three types of bicyclesa dirt bike, a mountain bike, and a racing bike. Data on sales and expenses for the past quarter follow: Total Dirt Bikes Mountain Bikes...
?? A local college is deciding whether to conduct a campus beautification initiative that would imvolve various projects, such as planting trees and remodeling bulidings, to make the campus more...
A company has net income of $196,000, a profit margin of 9.7 percent, and an accounts receivable balance of $135,370. Assuming 70 percent of sales are on credit, what is the companys days sales in...

Why is it possible for the effective cost of long-term debt to exceed the cost of short-term

Question:

Step by Step Answer:

The cost of longterm debt can exceed the cost of shortt...View the full answer

Contemporary Financial Management

Students also viewed these Finance questions