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.
Liquidity Ratios - Ratio Analysis It also identified as working capital ratios. They show capability of the firm to meet its short term maturing financial obligation/recent l
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
Government - Measuring Business Performance Government The Government is interested particularly in utility companies as KPLC, KPTC and such will offers public services -
BalanceSheet format
various stages in inancial distress and bankruptcy
Setting a Reorder Point - ROP Once the order quantity has been determined, the next question to be settled is when to place the order. If an order is released and it takes th
Business Ethics - Objectives of Business Entity Connected to the question of social responsibility is the matter of business ethics. Ethics are explained as the "standards of
DIY Inc. plans to raise $200,000 with a right offering. The current stock price is $100 and there are 80,000 shares outstanding. a. If DIY sets the subscription price to be $80
what are financial markets. why do they exist
An industrial engineer proposed the purchase of a RFID Fixed Asset Tracking System for the company's warehouse and weave rooms. The engineer though that the system would provide a
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