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1) Future cost and historical cost: financial decision is based on the future cost and not on the historical cost. The decision related to the future and hence the cost are likely to be incurred in furthered costs.
2) Specific cost and composite costs: the cost of individual source of the capital of all the sources combined in the terms as composite cost or overall cost. It is thus the weighted cost thus. the cost of debenture and preference shares equity shares and retained earnings is to be secretly calculated first and then combined cost can be computed since the combined cost consider the quantum of the financing through each cost the cost is known as the weighted cost. It is this overall which is the important in the evaluating of a firm as on ongoing entity. The composite cost of capital is the cost which is to be considering while the evaluating capital project also. In case only one source of financing is to be used for the investment proposal the specific cost of that source of that funds may be consider but in a capital structure decision, it is always the weighted cost of capital that is significant.
Working and function of stock exchange
Project Evaluation The expected value calculations are crucial to project investment decisions. The following example explains the use of probabilities in project evaluation.
While poverty reduction has become the main goal of development efforts, there is an on-going and sometimes heated debate about the elements that would be at the center of any sens
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I just purchased a stock that would pay the dividends of the first four years as D1 = $0.65, D2 = $0.74, D3 = $0.79, D4 = $0.84. I also told that the dividends would grow continual
(b) What are the possible advantages of an offshore pension fund?
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Weighted Average Cost of Capital Weighted average cost of capital is the average cost of the costs of several sources of financing. Weighted average cost of capital is also kn
Q. How to calculate correlation co-efficient? The correlation co-efficient measures the nature and the extent of relationship between the stock market index return and the stoc
Describe the major financial problems of a firm The three questions posed above cover between them the major financial problems of a firm. Or we can say that financial manageme
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