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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}
If invested 2500 in a bank that pays 1% annually. How long will it take for the funds to double?
Discuss the option of dividend reinvestment plans
At times, companies accuse investors of performing credit sales that they make their quotations fall. Is that true? It is true: there are companies that accuse investors who pe
the approach focussed mainly on the financial problems of a corporate enterprise
MARGINAL ANALYSIS It is difficult to develop the conditional profit table when there are a large number of scenarios and possible actions. The marginal analysis approach sides
State the term nature of financial instruments. Nature of financial instruments (securities): Financial instruments (termed as securities) can be classifies in two broad
Financial assets: Financial assets/instruments represent the financial obligations that arise when the borrower raises funds in the financial market. In exchange for the funds
(a) One could obtain a market arbitrage position as follows: buy Honeywell shares as well as sell General Electric shares. If the merger gets place the Honeywell shares will conve
Every business concern should have neigh adequate capital to run the business operations it should have neither redundant nor excess working capital non inadequate or Shortage of
Q. What do you mean by Public deposits? Public deposits are the fixed deposited by the business enterprises directly from the company. This source of the raising the short term
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