the basic of capital budgeting

... CALLED THE PROJECT COST OF CAPITAL IN CAPITAL BUDGETING FIND (A) THE PV OF THE EXPECTED CASH FLOWS AND/OR (B) THE ASSET’S RATE OF RETURN IF THE PV OF THE INFLOWS IS GREATER THAN THE PV OF THE OUTFLOWS ... TO THE VALUE OF THE FIRM D WOULD THE NPVs CHANGE IF THE COST OF CAPITAL CHANGED? ANSWER: THE NPV OF A PROJECT IS DEPENDENT ON THE COST OF CAPITAL USED THUS, IF THE COST OF CAPITAL CHANGED, THE ... when the company wants to know if the expected value of the cash flows is greater than the cost of the project, and whether or not the expected rate of return on the project exceeds the cost of the...

Ngày tải lên: 01/07/2014, 21:28

... flows of one are unaffected by the acceptance of the other mutually exclusive, if the cash flows of one can be adversely impacted by the acceptance of the other 10 - What is the payback period? The ... cost of capital Capital rationing 10 - 51 Increasing Marginal Cost of Capital  Externally raised capital can have large flotation costs, which increase the cost of capital  Investors often ... If profiles don’t cross, one project dominates the other 10 - 26 Two Reasons NPV Profiles Cross Size (scale) differences Smaller project frees up funds at t = for investment The higher the opportunity...

Ngày tải lên: 06/04/2015, 19:41

... (and thereby generating the expectation of a strengthening of the rand) or by raising interest rates Under either of these options, it would probably be both difficult and undesirable for the ... (NOFP), which is a measure of its short-term foreign currency exposure, has been reduced by nearly two-thirds since the currency crisis of 1998 Nevertheless, the NOFP and other indicators of ... or the recipient of the inflow may decide to reinvest the funds overseas, exchange control regulations permitting -7- However, the findings also indicate that all other components of the capital...

Ngày tải lên: 24/10/2012, 09:11

... choice of capital structure The ones reviewed in this section will be the trade-off theory, the agency cost theory and the pecking-order theory 2.2.1 THE TRADE-OFF THEORY The trade-off theory ... theories of capital structures? 1.2 RESEARCH OBJECTIVES In short, the purposes of the research are: (1) An overview of the theory of capital structure in order to see the importance of an optimal capital ... than the book value of equity this year due to falling prices because of the collapse of the stock market in Vietnam The following is an analysis of the components of the capital structure of Vietnam...

Ngày tải lên: 09/09/2013, 23:46

... other tier of the company, the management team is directly responsible for the day-to-day operations (and profitability) of the company * Chief Executive Officer (CEO) – As the top manager, the ... to maintain the smooth operation of the firm, with the assistance of senior management Often, the CEO will also be designated as the company's president and therefore also be one of the inside ... was accepted The means of results in table told that the more proportion number of women on boardroom, the higher profit of bank The higher proportion number of women on the board, the larger bank...

Ngày tải lên: 09/09/2013, 23:50

... Understand the cost of capital and the specific sources of capital associated with the cost of capital • Determine the cost of debt and preference share capital • Calculate cost of ordinary share capital, ... next dollar of total new financing  Is an increasing function of the level of total new financing  The ‘break point’ is the level of total new financing at which the cost of one of the financing ... wi = Proportion of long term debt in the capital structure wp = Proportion of preference share capital in the capital structure ws = Proportion of ordinary share equity in the capital structure...

Ngày tải lên: 16/12/2013, 14:57

... shows that the cost of capital of the firm depends on four factors: the risk free rate, the aggregate risk tolerance of the market, the expected cash flow of the firm, and the covariance of the firm’s ... b ) Clearly the cost of capital for the firm will be somewhere in between the cost of capital j for the riskless component and the cost of capital for the risky component But if the firm’s expected ... increases the variance and covariances, which increases the cost of capital The equilibrium is then the net of these two effects In our example, the overall effect decreases the cost of capital. 22...

Ngày tải lên: 06/03/2014, 21:20

... nowhere The overall stock market is the same How many people over the years have bought, then sold such stocks as Wal-Mart and Microsoft, then kicked themselves, because they spent the cash they ... need, so they reward their investors well In the United States, there are two kinds of companies which are REQUIRED to pay at least 90% of their cash to their investors One of those types of companies ... for a big profit once they retire And if they retire during a bear market like the current one, there's no guarantee they'll get nearly the money they hoped for years ago And once they sell, at...

Ngày tải lên: 09/03/2014, 02:20

... Location of Irrigated Areas of Californ ia, 1920 (Cou rtesy of Tin a Esp in oza) xxvi REFERENCE MAPS 100 Miles Ap p roxim ate Location of Irrigated Areas of Californ ia, 1930 (Cou rtesy of Tin ... Tow n s, an d Cities of Californ ia (Cou rtesy of Tin a Esp in oza) xxiv REFERENCE MAPS 100 Miles Ap p roxim ate Location of Irrigated Areas of Californ ia, 1900 (Cou rtesy of Tin a Esp in oza) ... rop riation s of lan d an d w ater; th e rise of h igh -valu e sp ecialty crop s an d th e econ om y of lan d su bd ivision ; th e p roblem of m arkets; th e u n even d evelop m en t of th e irrigation...

Ngày tải lên: 28/06/2014, 10:20

... uses the rate of return concepts covered in previous chapters, along with the concept of the weighted average cost of capital (WACC), to develop a corporate cost of capital for use in capital budgeting ... describing the logic of the WACC, and why it should be used in capital budgeting We next explain how to estimate the cost of each component of capital, and how to put the components together to ... USED THE REASON IS THAT THE COST OF CAPITAL IS USED IN CAPITAL BUDGETING, AND CAPITAL BUDGETING CASH FLOWS ARE GENERALLY ASSUMED TO OCCUR AT YEAR-END THEREFORE, USING NOMINAL RATES MAKES THE TREATMENT...

Ngày tải lên: 01/07/2014, 21:28

... target weights for the percentages of the firm that will be financed with the various types of capital 7.2 Weighted Average Cost of Capital 23/8/2012 B02022 – Chapter – The Cost of Capital 29 23/8/2012 ... 23/8/2012 B02022 – Chapter – The Cost of Capital 36 Should the company use the composite WACC as the hurdle rate for each of its divisions? Estimate the cost of capital that the division would have ... know the market value of debt, then it is usually reasonable to use the book values of debt, especially if the debt is short-term 23/8/2012 B02022 – Chapter – The Cost of Capital Suppose the...

Ngày tải lên: 12/07/2014, 14:12

... study calculates the numerator of the market-to-book ratio (MB) as the sum of the market value of equity and the book values of preferred stock and borrowings The market value of equity for any ... however, is beyond the scope of the present paper, and will be pursued in a later study The paper begins with a review of the literature on the firm’s choice of capital structure and the nascent interest ... based on a tradeoff between the tax benefits of debt and the distress costs of debt A second tradeoff-type theory argues that an optimal financing mix may result from the balancing of the agency costs...

Ngày tải lên: 12/07/2014, 19:09

... and make the situation on the basis of capital and the demand for capital in the next period of the bank Bonds are a paper receipt of debt, is a form of raising capital is quite flexible The tool ... directing the business executive, promptly correct the errors in the performance of, improve the quality of the business, ensuring the safety of property 2.2.2 The status of raising capital in ... results of this research indicate that a good method to mobilizing capital depending on the method of analysis demand of customers, the experience of deposits officers, the regulations of the commercial...

Ngày tải lên: 20/10/2014, 15:15

... are not sources of funding that come from investors, so they are not included in the calculation of the cost of capital We adjust for these items when calculating the cash flows of a project, but ... always use the target weights for the percentages of the firm that will be financed with the various types of capital 9 - 30 Estimating Weights for the Capital Structure  If you don’t know the targets, ... reflect the division’s risk and capital structure 9 - 37 What procedures are used to determine the risk-adjusted cost of capital for a particular division?  Estimate the cost of capital that the...

Ngày tải lên: 30/10/2014, 08:23

... part to the French king’s regular habit of defaulting The existence of these secure and easily traded English securities furthered the development of the London capital market, making it the financial ... development? What they show is that three factors are critical for the development of financial institutions: the level of government debt, the size of the middle class, and the amount of information ... level of debt relative to the size of the country’s economy or the amount of taxes the government collects The unpleasant arithmetic of government budgets might conceivably give us some sense of...

Ngày tải lên: 01/11/2014, 17:10

... originated in the hearts of Western 20 INTRODUCTION capitalism the towers of Wall Street and the City of London The crisis of confidence that resulted from the failure of borrowers to meet their obligations ... being Both the creation of capital and the investment of capital originate in human relationships For this reason, labor must be understood as The Death of Capital 37 another form of capital Labor ... is, in fact, directly contrary to the teachings of Adam Smith and other theorists of capital, as the following pages explain Moreover, the development of the law of fiduciaries has had a crippling...

Ngày tải lên: 01/11/2014, 21:25

... up of the same three parts: the rent of this land and the reared, the labour of tending and rearing him, and the profits of the farmer who advances both the rent of this land and the wages of ... itself into the same three parts, and be parcelled out among the different inhabitants of the country, either as the wages of their labour, the profits of their stock, or the rent of their land.’4 ... with the postulate that the rate of profit on capital tends to equality throughout the economy,16 for the mechanism which equalises profits is the flow of new investment, and the transfer of capital...

Ngày tải lên: 04/11/2014, 11:14

... are not sources of funding that come from investors, so they are not included in the calculation of the cost of capital We adjust for these items when calculating the cash flows of a project, but ... always use the target weights for the percentages of the firm that will be financed with the various types of capital 9 - 30 Estimating Weights for the Capital Structure  If you don’t know the targets, ... reflect the division’s risk and capital structure 9 - 37 What procedures are used to determine the risk-adjusted cost of capital for a particular division?  Estimate the cost of capital that the...

Ngày tải lên: 06/04/2015, 19:41

... action The end of the New Order can thus be seen as the end of a deviation and as a ‘normalisation’ of capitalism With the help of Hutchcroft’s typology of capitalisms, it is possible to describe the ... increased the secretiveness of the actors.10 On the other hand, the relative openness of post-Soeharto Indonesia provided new sources of information that balanced the lack of data for the New Order These ... seen by the culturalists as the very effect of them: the business behaviour of the Chinese However, these approaches dealing in the framework of business administration agreed on the same basic...

Ngày tải lên: 15/09/2015, 17:09