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.
How is the channelling of funds from savers to spenders very important? The channelling of funds by savers to spenders is very significant for two purposes: • One, lender-sa
Volpe Corporation produces class rings to sell to college and high school students. These rings sell for $75 each, and cost $30 each to produce. Volpe Corporation has fixed costs o
Agency Relationship between Government and the Shareholders Shareholders and via extension, the company they own operate within the environment requiring the charter or licens
Ask question #MinimQuestion You are the financial accountant of Donald Bhd, a manufacturer and wholesaler of soft drinks. Donald Bhd is in direct competition with Fizz Bhd and Po
Goals of firm's Credit Standards The goal of the firm's credit policy is to maximize the value of such firm. To complete this goal, the evaluation of investment in receivables
details about forward contract
PESTAL ANALYSIS OF GODREJ FMCG
1) What is the holding period return to an investor who bought 100 shares of Charter Oil nine months ago for $36 a share, received two $50 dividend checks, and sold the s
Money or Discount Markets - Financial Markets 1. Are discount and acceptance financial institutions 2. This is a market for S.T funds growing up in one year. Money market w
Tank Industries Washers decides to pay the following dividends over the next four years: $2.50, $3.20, $4.75 and $5.20 respectively (starting at time 1). a. After year 4, the
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