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Dynamic Electronics, Inc., a successful and high-growth company, consistently experiences a favorable difference between the rate of return on its...

3 questions total. I removed the last question.
1. Dynamic Electronics, Inc., a successful and high-growth company, consistently experiences a favorable difference between the rate of return on its assets and the interest rate paid on borrowed funds. Explain why this company should not increase its debt to the 90% level of total capitalization and thereby minimize any need for equity financing. 2. Company B is a wholly owned subsidiary of Company A. Company A is also Company B’s principal customer. As a potential lender to Company B, what particular facets of this relationship concern you most? What safeguards, if any, do you require in any loan contract? 3. Analysts cannot unequivocally accept the depreciation amount. One must try to estimate the age and efficiency of plant assets. It is also useful to compare depreciation, current and accumulated, with gross plant assets, and to make comparisons with similar companies. While an analyst cannot adjust earnings for depreciation with precision, an analyst doesn’t require precision. Comment on these statements.
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finance_questions.doc

1. Dynamic Electronics, Inc., a successful and high-growth company, consistently
experiences a favorable difference between the rate of return on its assets and the interest
rate paid on borrowed...

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