Essay on Carson Company
b. In what way is Carson a deficit unit? Carson has borrowed funds from financial institutions.
c. How might finance companies facilitate Carsons expansion? Finance companies can provide loans to Carson so that Carson can expand its operations.
d. How might commercial banks facilitate Carsons expansion? Commercial banks can provide loans to Carson so that Carson can expand its operations. 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product …show more content…
a. Explain why Carson should be very interested in future interest rate movements. The future interest rate movements affect Carsons cost of obtaining funds, and therefore may affect the value of its stock.
b. Given Carsons expectations, do you think that Carson expects interest rates to increase or decrease in the future? Explain. Carson expects the U.S. economy to strengthen, and therefore should expect that interest rates will increase (assuming other things held constant).
c. If Carsons expectations of future interest rates are correct, how would this affect its cost of borrowing on its existing loans and on future loans? Carsons cost of borrowing will increase, because the interest rate on