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COST OF CAPITAL
A project's Cost of Capital is the smallest amount of acceptable rate of return/required rate of return on funds committed to the project. It is a compensation for time and risk in the use of capital by the project. Since the investment projects may vary in risk, each one of them will have its own exclusive cost of capital.
The Firm represents the aggregate of investment projects undertaken by it. so, the firm's Cost of Capital will be the overall required rate of return on the aggregate of the investment projects.
What is the matching principle of working capital financing? What are the advantages of following this principle? The matching principle is while short-term financing is employe
Determination of spread Daily interest rate = 5.11/ 365 = 0.014% per day Variance of cash flows = 1000 × 1000 = $1000000 per day Transaction cost = $18 per transaction
Conversion value is the amount which investors will receive by immediately exchanging the bonds for equity stock and selling the stock at prevailing market
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