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.
Question 1: i) Discuss the main risks facing a retail bank in its traditional business of deposit taking and lending? ii) How can a bank manage the risks related to credit
State about the Odd-lot Dealer He/she specializes in buying and selling in amounts which are less than present trading units. They buy and sell odd lots, make them up into ma
TRADE FINANCE AND RISK
Cash Management Techniques The basic strategies that must be employed via the business firm in managing its cash are as: i) To pay account payables as behind as possible wi
how to calculate cash flow? What components are required to calculate it ?
Constraints of Venture Capital in US 1. Require of rich investors in US, thus inadequate equity capital. 2. Inefficiencies of stock market - NSE is investors and inefficien
Ask quQUESTION 1 1. In the ratio test used to determine whether a qualified plan is nondiscriminatory, what is the minimum percentage of nonhighly compensated employees who must be
From the following selected operating date, determaine the DOL. Which company has the greater amount of business risk? Why? Particulars A Ltd
Investment Analysis Any type of company will invest finance for the sake of deriving a return that is useful for four main purposes as: 1. To reward the owners or shareholder
If you inherited $ 45,000 today and invested all of it in a security that paid a 7 percent rate of return, how much would you have in 25 years?
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