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Examine the difference between Explicit Cost and Implicit Cost
Cost of capital can be either implicit cost or explicit. Explicit cost of any source of capital is the discount rate which equates the present value of cash inflows that are incremental to taking of the financing opportunity with present value of its incremental cash outlay. Hence the explicit cost of capital is the internal rate of return of cash flows of financing opportunity.
A series of each flows are associated with a method of financing. At the instance of acquisition of capital, cash inflow takes place followed by the subsequent cash outflows in the form, of interest payment, payment of dividends orrepayment of principal money. Hence, if a company issues 10 per cent perpetual debentures worth USD 10,00,000, there would be cash inflow to firm of the order of 10,00,00. This will be followed by annual cash outflow of USD. 1,00,000. The rate of discount which equates the present value of cash inflows with present value of cash outflows, would be explicit cost of capital.
Yield curve strategies take into account the distribution of the maturities of the bonds of the portfolio in order to take advantage of the forecasted movements o
Advantages: It is easy to calculate and catch. With the help of this technique, projects can be ranked in terms of their economic merits without much of complication.
Q. Explain Dividend Policy Decision? Dividend Policy Decision: - The financial management has to make a decision as which portion of the profits is to be distributed as dividen
Role of Custodians The Securities and Exchange Board of India on 5th May, 1996, through its notification No.S.O.344 (E) has issued the SEBI (Custodian of Securities) Regulation
How do financial managers calculate the average tax rate? Average tax rates are computed by dividing tax dollars paid by earnings before taxes (EBT).
Q. Credit Analysis for Formulation of Optimum Credit Policy? Credit Analysis: - Credit Analysis is made to estimate the credit worthiness of the customers before making credi
Spreads The difference between two futures price is referred to as ‘spread'. For the same underlying good, if there are two different prices on two different expiration dates, t
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
Variance Analysis: In its commonest form variance analysis is the process of comparing budgeted financial performance (or financial goals) against actual financial performance.
Illustrate about the Financial Management Individual businesses face problems dealing with acquisition of funds to carry on their activities and with determination ofoptimum
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