Question 1: Define the following terms? a. Equity Financing? b. Debt Financing?

Question

Question 1: Define the following terms? a. Equity Financing? b. Debt Financing? Question 2 The general Steps in Egineering economic decision -making are based on all of the following except 1) Understanding the defined problem 2) Collecting all relevant information 3) Defining the set of feasible altenatives 4 Identifying the criteria for decision making 5) Evaluating the alternatives and applying sensitivity analysis 6 Presenting the obvious solutions 7) Selecting the "best" alternative 8) Implementing the altemative choice and monitoring the outcomes/results Question 3: Distinguish between the Power of Time and the Power of Interest Rate on money for an Electrical Engineering Project Investment? Question 4: In the interest formulas, a simple interest can be used in any of the single payment formulas as long as the n' values correspond to the interest period? A) TRUE B) FALSE Question 5: An arithmetic gradient refers to cash flow wherein the values change by the same percentage in each interest period? A) TRUE B) FALSE Question 6: In solving from an unknown interest rate involving only the F/P formula, it is possible to solve for by rearranging the equation? T directly A) TRUE B FALSE following numbers by the compound interest rate ding u 12 A quick, rough estimate of the time required for money to double can be obtained by dividing which of the A) 100 B) 72 C) 64 D) 52

Explanation / Answer

Question 1

Equity financing often means issuing additional shares of common stock to an investor. With more shares of common stock issued and outstanding, the previous stockholders' percentage of ownership decreases.

Debt financing means borrowing money and not giving up ownership. Debt financing often comes with strict conditions or covenants in addition to having to pay interest and principal at specified dates. Failure to meet the debt requirements will result in severe consequences. In the U.S. the interest on debt is a deductible expense when computing taxable income. This means that the effective interest cost is less than the stated interest if the company is profitable. Adding too much debt will increase the company's future cost of borrowing money and it adds risk for the company.

Question 2

3. Defining the set of feasible alternatives.

Question 4

True

Question 5

False

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