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.
List and describe the three career opportunities in the field of finance. Finance has three major career paths that are financial management, financial markets and institutions
BalanceSheet format
What are the main functions of the financial systems? The main functions of financial systems in short are as follows: a. Give the mechanisms by that funds can be transferre
Market For Funds Market for Funds and Financial Institutions in Middle Asia 1. Financial markets refer to an elaborate system of the financial institution and arrange
Development of Lease Finance in Middle Asia Reasons Why Lease Finance Is Not Well Developed In Middle Asia 1. Lease charges are generally prohibitive that is the cost
Dividend Cover Ratio Dividend cover = EPS/ DPS = Earning to ordinary shares/Dividend paid This signifies the number of times dividend can be paid from earnin
Advantagesand Disadvantages of IRR Advantages of IRR It seems time value of money It seems cash flows over the whole life of the project. It is compatible along
1 st bank offers you a car loan at an annual interest rate of 10% compounded monthly. What effective annual interest rate is the bank charging you? Solution - Calculate
Dow theory elliot wave theory
A current radio advertisement states that the average American household has an average credit card debt of $25,000. Based on an APR (Annual Percentage Rate) of 18% (common for cre
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