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define the meaning of rate of return on investmentan investment project which provides positive npv when its cash flows are discounted by cost of
what is the investment evaluationinvestment evaluation the primary purpose of measuring the cost of capital is its use as a financial standard
state the significance of the cost of capital it must be recognized at the outset that cost of capital is one of the most difficult and disputed
determine the amount of financing required the last factor determining companys cost of funds is the amount of financing required where cost of
a firms operating and financing decisions risk also results from decisions made within the company this risk is usually divided into two
what are the market conditions of cost of capital security may not be readily marketable when investor wants to sell or even if a continuous demand
state the economic conditions of cost of capitalgeneral economic conditionsthese include demand for and supply of capital within the economy and
what are the factors determining the cost of capitalthere are many factors which impact the cost of capital of any company this would mean that
determine the factors of financial risk by giving examplew t l companys cost of long-term debt two years ago was 8 percent this 8 percent was
explain about the financial riskfinancial risk are presumed to be constant changing cost of each type of capital j over time must be affected only by
determine the key factor affecting financing costsbecause cost of capital is measured under the assumption that both firms asset structure and its
state about the capital structure of financial riskfrequently the funds supplied to a firm by lenders will change its financial structure and charge
determine the financial structure of business riskfinancial structure shifts toward suppliers of funds recognize a more highly levered position
what is financial riskfinancial risk is affected by mixture of long-term financing or capital structure of firm firms with high levels of long-term
definition of cost of capitalin analyzing the cost of capital it is presumed that business risk of the firm remains unchanged ie that projects
what is business riskit is related to response of the firms earnings before taxes andinterest or operating profits to changes in sales when cost of
risk of cost of capitala straightforward assumption of traditional cost of capital analysis is that firms business and financial risk are unaffected
define the term- cost of capitalcost of capital is the rate of return a firm should earn on its investments for the market value of the firm to
explain the implicit cost of capital implicit cost of capital can be defined as the rate of return associated with the best investment opportunity
define the explicit cost of capitalexplicit cost of retained earnings that involve no future flows to or from firm is minus 100 per cent this must
determine the advantages of explicit costexplicit cost of an interest bearing debt will be the discount rate which equates present value of the
examine the difference between explicit cost and implicit costcost of capital can be either implicit cost or explicit explicit cost of any source of
what is marginal cost of capitalmarginal cost of capital by contrast refers to incrementalcost associated with new funds raised by firmmarginal cost
state what is average costaverage cost represents weighted average of the costs of each source of fundsemployed by enterprise weights being the
for capital budgeting decision which cost is relevantfor capital budgeting decision composite cost of capital is comparatively more relevant albeit