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Weaknesses of WACC as Discounting Rate
WACC/Overall cost of capital has the following problems like a discounting rate as:
Note
When using market values to verify the weight/proportion in WACC, the cost of retained earnings is left out as it is already involved or reflected in the MPS and hence the market value of equity. Retained earnings are an internal origin of finance hence; whenever they are high there is low gearing, lower financial risk and hence highest MPS.
Example of Asset Based Valuation Extracted information from the books of Kent Limited. Current liabilities Bank overdraft Sh. 300,000
Review the budget below and answer the questions following the budget. FINANCIAL ACCOUNTING—STATEMENT OF REVENUE AND EXPENSES Statement of Revenue and Expenses for Group Practice f
management and directors
Cost of Redeemable Debentures and Preference Shares Redeemable fixed return securities have an exact maturity period. The cost of those securities is called redemption yield
#what is an interest?
Debt Finance Debt finance is a fixed return finance like the cost as interest is fixed on the par value as face value of debt. This is ideal to require if there's a strong equ
Explain about the functions of financial systems. Financial systems perform the necessary economic function of channelling funds through units who have stored surplus funds to
Determinants of Required Rate of Return 1.Risk free rate - This is the interest rate such would exist on default free securities like Treasury bills and bonds. Risk free
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Similarities between Equity Finance and Preference Similarities among Equity Finance and Preference are as follows: a) Both may be permanent whether preference share capita
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