JoLi Corp. purchases a new delivery van which is expected to increase cash flows

Question

JoLi Corp. purchases a new delivery van which is expected to increase cash flows for the next 10 years. JoLi can finance the purchase with a standard 48 month vehicle loan, or by getting a 10 year loan from the bank. According to the hedging principle, JoLi should
Answers:
use the 10-year financing in order to match the cash flow stream from the asset with the financing repayments.

use the 48 month loan since it matches the type of asset with the type of loan.

use either type of financing, but hedge the risk in the options market.

avoid using either loan and finance the truck with current cash reserves to avoid interest expense.
.

Explanation / Answer

use either type of financing, but hedge the risk in the options market.

Related Questions

Navigate

• Browse (All)
• Browse J
• Subjects

---