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Q. Computation of the cost of capital?
Computation of overall cost of capital of the firm invoices
Cost of debts: debt may be issued at par , at premium or discount it may be perpetual or redeemable . the technique of computation of the costs in each can be explained as follows :
i) Debt issue at par: the computation of the cost of debts issued at par is comparative an easy task. It is the explicit rate of the interest rate adjusted further for the tax liabilities of the company. It may be computed according to the followings formula
Kd= (1-T)R
ii) Debts issued at the premium or discount: in case the debenture issued at premium or discount the cost of the debts should be calculated on the basis of net proceeds realized on the accounts of issue of such debenture or the bonds. Such costs may further be adjusted keeping in the view the tax rate applicable to the company
iii) Cost of the redeemable Debts: while calculating the cost of debts we have presumed that debenture are not redeemable during the life time of the company. However if the debenture are redeemable after the expiry limit of a fixed period the effective cost of the debenture before tax can be calculated by using the followings -
KD(before Tax) = {l+(p-np)/n}/{ (p+np)/2}
Effective Duration and Convexity The modified duration is a measure of the sensitivity of a bond's price to interest rate changes; the assumption made here is that the expected
The managing directors of three profitable listed companies discussed their companies' dividend policies at a business lunch. Company A ; has deliberately paid no dividends for
a) A niche market refers to a lucrative and small market segment. Marketing strategy is targeted and concentrated at this specific market segment. Pink Ladies are specifically targ
Q. What is Accelerated Depreciation? Accelerated Depreciation - Method which records greater DEPRECIATION than STRAIGHT-LINE DEPRECIATION in the early years and less depreciati
Steps involved in the Process of Securitization The following are the major steps involved: The lender (also called the originator) - in th
An Investor can receive income from this source when the bonds purchased at discount are held up to maturity or when he sells the bond before ma
Fundamentals of Structured Product Engineering 1. (a) Let r m denote the m month swap rate (or Libor rate). Subsequently the 3 × n month forward rate f (3 ×n )
Hi'' can you tel me a how you describe what is a company las or an example. Thanks iulia
The collaterals used in the repo market are high quality securities; but they are also not free from credit risk. In our earlier example, we see the dealer borrow
Electronic Communications Networks: In traditional stock exchanges, the buying and selling of stocks take place at a physical location only and the members have to conduct tradi
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