Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
Q. Evaluate of Risk-Adjusted Discount Rate?
Illustration: - From the following date state which project is preferable:
Year
Project A
Project B
1
60000
2
50000
3
40000
Initial Cost of the Project1
120000
Riskless discount rate is 5%. Project A is fewer risky as compared to project B and therefore the management considers risk premium rates at 5% and 10% respectively as appropriate for discounting the cash inflow. The discount factors at 10% and 15% are given below
10%
15%
0.909
0.876
0.826
0.756
0.751
0.650
Solution :-
First Step :- Computation of Risk-Adjusted Discount Rate
For Project A:
Riskless Discount Rate 5%
And Risk-Premium Rate 5%
Risk Adjusted Discount Rate 10%
For Project B:
And Risk-Premium Rate 10%
Risk Adjusted Discount Rate 15%
Second Step: - Computation of Discounted Cash Inflows (that is Present Value and Net Present Value of the Projects)
Project A Discounted Cash Inflows at 10%
Cash Inflows (Rs)
Discount Factor 10%
Present Value (Rs.) (Cash Inflow x Discount Factor)
Discount Factor 15%
.909
54540
80000
.876
70080
.826
41300
.756
45360
.751
30040
.650
32500
PV of Cash Inflow 125880 147940
Less: PV of Cash Outflow 120000 120000
Net Present Value 5880 27940
Comments: - The Net Present Value of Project B is superior to that of Project A. Therefore Project B is Preferable.
Wha is Asset turnover- performance ratios Asset turnover = Turnover/ Total assets or capital employed This demonstrates how much sales are generated for every £1 of capit
The Nu-Nu Brothers Inc. (NNBI) has the following capital structure, which it considers to be optional: Debt 25% Preferred Stock 15% Common Equity 60% NNBI''''s expected net income
Regulatory Framework Abroad A regulatory mechanism, in terms of finance, is the mechanism to regulate the working of the financial system. Its function is to ensure the complia
how to solve balance sheet?
Q. Explain Marginal cost of capital? The calculation of cost of capital focused when the firms total financing and its paten of financing is given and remains constant. However
The Nu-Nu Brothers Inc. (NNBI) has the following capital structure, which it considers to be optional: Debt 25% Preferred Stock 15% Common Equity 60% NNBI''s expected net income t
What happens when a bank charges discount interest on a loan? While a bank charges discount interest on a loan the required interest payment is subtracted from the loan carries o
The authority and duties of members (shareholders) Members and shareholders shall together and severally protect, conserve and actively exercise the supreme authority of the co
Q. What do you signify by Receivables Management? Ans. Receivable Management: - The term receivables refer to debt outstanding to the firm by the customers resulting from sale
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +91-977-207-8620
Phone: +91-977-207-8620
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd