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!
You are asked to select three variables for a sensitivity analysis of weighted average cost of capital, what would you choose and why?
Expected return = risk free rate + beta (Market rate minus risk free rate)
Debt holders simplycharge a percentage say 10% per annum.
Weighted average cost of capital is then calculated based on the amount of each equity and debt used in the total capital
(a) Risk free rate = The risk free rate is the rate paid by US treasury on sovereign bonds. Now this rate may change and change the equity rate of return. Specially during times of crisis, the risk free rate fluctuates as the governments try to reduce the impact of recession on the economy. High risk free rate will lead to high equity rate of return and high weighted average cost of capital and vice versa.
(b) Market rate - This is generally based on the returns generated by the broad market index such as SNP 500 etc. These may change based on how the index is performing. During boom periods, they generate better returns as compared to bad periods. High market rate will lead to high equity rate of return and high weighted average cost of capital and vice versa.
(c) General interest cost in the country - This is based on the general interest rate declared by central bank of various countries such as Federal Reserve of USA plus appropriate premium. Central banks lend money to various commercial banks at the general rate of interest and then these commercial banks add suitable market risk premium depending upon on the risk involved in the project. Hence, general rate of interest will lead to higher rate of debt and higher weighted average cost of capital and vice versa.
analysing ratios
#questioxcvxcvn..
Example of Dividend Basis Valuation Company Laxmi Synthetics pays a dividend of 10% on its Sh.60 par value ordinary shares. This company uses a discount rate of 15%. A
You are asked to select three variables for a sensitivity analysis of weighted average cost of capital, what would you choose and why? Weighted average cost of capital is th
State the Determinants of Return Three major determinants of the rate of return expected by investor are: (i) Time preference risk-free real rate. (ii) Expected rate o
Definition of Stock Exchange According to Pyle: "Stock Exchange are market places where securities which have been listed thereon, may be bought and sold for either investme
You have the following information for Stardusts: Current EPS is $1.79. The current dividend is $.68 per share. The return on equity is 24%. The present price is $49.22. a.
Which of the following is true with regards to rising interest rates. A. Use long-term loans to take advantage of current low rates. B. The term of the loan is ot impacted by risin
Types of jobbers in Stock Market There are three kinds of jobbers as: a) Bulls A jobber buys shares while prices are down and hold them in anticipation such t
What are the Advantages of Listing on Stock Exchange (i) Detailed information about company is available. (ii) Information increases activity of purchase and sale of the sec
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