It often makes tax sense to sell a bond at a premium and pay capital gain taxes on it.
After all, companies like Instagram seem to fall into that category generating very rapid growth with few employees ultimately selling out at a high premium to the capital invested.
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Raise money when you can, be prepared to pay a premium for your capital and scale back your plans if necessary, but do whatever it takes to get your business up and running and your product out the door.
That an investor can earn a large premium by using his capital to supply liquidity should, through market forces, ensure there is enough liquidity available.
The first is that governments running large and potentially unsustainable budget deficits have to pay a risk premium for borrowing in the capital markets.
The coal industry is a good example of how managements get carried away in the up cycle, committing serious money to new mine development and buying sizable coal operators at premium prices, further leveraging their capital structure.
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Because they were AAA-rated and yielded a premium over the banks' cost of capital.
History has shown us that companies typically will raise capital when the stock price is at a double-digit premium to book value.
But his shares do not deserve a huge premium on the theory that he can keep pulling capital gains out of the hat.
On the other hand, a bullish outlook may suggest an exercise and hold strategy at a much lower premium in order to get future long-term capital gains.
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At Root Capital, we find that strengthening rural enterprises like Apodip with access to capital, financial management training, and connections to international buyers paying premium prices helps them shore up member loyalty and withstand the pressures of narco-trafficking at the household level.
This may be born of something as innocuous as your pension premium claim, or the base cost you gave for a capital gains disposal.
Other mortgage REITs include American Capital Agency (AGNC) which is trading at a 22% premium to the third quarter book value and Chimera Investment Corporation (CIM) which is trading at a 23% premium to third quarter book value.
Their dividends are variable, their cash flows less certain and therefore an equity risk premium should exist which compensates stockholders for their junior position in the capital structure.
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Without clarity as to whether bad institutions will be closed, the capital markets will force all but the strongest of banks to pay a huge premium to borrow money.
In a nutshell, Buffett looks for companies that have strong brands (which promotes premium pricing) that run understandable businesses with a good return on capital without a lot of debt.
The widening of the risk premium today is a major depressant because it has raised the cost of capital for everyone but the U.S Treasury.
That is a larger premium even than during the financial crisis caused by the collapse of Long-Term Capital Management in the autumn of 1998.
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In the first case, the cost of protection (the premium) would be buried in the accounts, in the operating costs, while the capital appears nowhere at all.
"Investors are attracted to companies that are producing 30%-40% earnings growth per year and are willing to pay a high premium to participate in this kind of growth, " says Vineet Mishra, Southeast Asia head of equity capital markets at J.
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