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Define the meaning of rate of return on investment
An investment project which provides positive NPV when its cash flows are discounted by cost of capital makes a net contribution to the wealth of shareholders. If project has zero NPV , it means that it's a return just equal to the cost of capital and acceptance or rejection of the project won't affect the wealth of shareholders The cost of capital is minimum required rate of return on investment project which keeps the present wealth of shareholders unchanged. It may be, hence, noted that cost of capital signifies a financial standard for allocating the firm's funds, supplied by creditors andowners, to the various investment projects in most efficient manner.
Illustration An investor with a 1-year investment horizon purchases a 20-year 5% corporate bond. The prevailing price of the bond is Rs.82.3488 for a yield of 6.2%
R eceipt of bids and bid opening We discussed how to prepare the bids and to publish them in the earlier sub section. Now let us see how to receive and open bids. To receiv
Dividend yield plus growth in dividend method When the dividends of the firm are predictable to grow at a constant rate and the dividend payout ratio is constant, this techniq
Management of pension funds Employees Provident Fund Organization (EPFO) is the major organization which deals with the pension system in India. The Employees' Provident Fund O
When J was promoted to be the new Sales and Marketing Manager for Company L, after working there in different capacities over the last ten years, it was a popular choice between he
Difference between Debtcapital and Equity capital Debtcapital comprises: Long-term loans (debentures, loan stock etc.) Preference share capital May also in
a. Consider the time line below that shows periodic cash flows and interest rates per period. Interest rate/year 0 1 2 3 4 5 6 7 8 9 Time 2,500 -4,000 6,000 -3,700 Cash flows
Cash flow statement analysis Cash flow statement is a primary financial statement and shows cash generating ability of the organisation. Cash generated from operations can b
Explain the factors affecting the choice of a minimum cash balance amount. The smallest cash balance amount is determined by how easy it is to raise funds when needed, how expe
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