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. Importance of the Cost of Capital?
Importance of the Cost of Capital:-
(1) Useful in Designing the Capital Structure: - The perception of cost of capital plays a very important role in designing the capital structure of a company.
Capital structure of a business is the ratio of debt as well as equity. These sources be different from each other in terms of their respective costs. Since such a company will have to design such a capital structure which minimizes cost of capital.
(2) Useful in taking capital Budgeting Decisions: - Capital budgeting is the procedure of decision making regarding the investment of funds in long term projects of the company. The concept of cost of capital is extremely useful in making capital budgeting decisions for the reason that cost of capital is the minimum required rate of return on an investment project.
(3) Useful in evaluation of financial efficiency of top management:-Concept of cost of capital is able to be used to evaluate the financial efficiency of top management. Such estimation will involve a comparison of projected overall cost of capital with the actual cost of capital incurred by the management. Lesser the actual cost of capital is the better financial performance of the management of the firm.
(4) Useful in comparative analysis of various sources of finance: - Cost of capital to be increased from various sources goes on changing from time to time. Computation of cost of capital is helpful in analysis of usefulness of various sources of finance.
(5) Useful in taking other financial decisions: - The cost of capital concept is as well useful in making other financial decisions such as:
Illustration Discount bond (5 yr. bond with 10% coupon) (expected rate yield at 12%) Premium bo
The key parameters taken into account while rating a debt instrument are as follows: 1. Industry Evaluation - This involves an evaluation of the
Swap-Linked Notes: Interest rate swaps are derivative products which help in transforming the cash flows of existing debt issues. These are not only useful in covering the exis
Q. Interest Rate Risk in financial management Interest rate risk is the variation in the single period rates of return caused by the fluctLlaoons in the market interest rate. M
You are currently an Analyst working for a finance publication firm and as part of your responsibilities; you are required to provide a monthly forecast and analysis of certain com
Under treasuries, there exist different types of securities like treasury bills, treasury notes, treasury bonds, inflation protection securities
strengths and weakness
Q. Explain Discounting or Present Value Concept? Discounting or Present Value Concept: - According to this concept rupee one of today is more valuable than rupee one a year lat
The risk free rate is 10 percent and the expected return on the market portfolio is 14 percent. A firm considers a project that is expected to have a beta of 1.3, whereas the beta
Employee Benefit Plan - Compensation arrangement, usually in writing, used by employers in addition to wages or salary. Some plans like group term life insurance, medical insuranc
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: +1-415-670-9521
Phone: +1-415-670-9521
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd