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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.
State the major decision of financial management The major decision of financial management is the decision relating to dividend policy. The dividend must be analysed in relat
Investors, who do not believe in Efficient Market Hypothesis (EMH), adopt active management strategies. Such investors incur more search costs (with regard to tim
Andrew Industries is contemplating issuing a 30-year bond with a coupon rate of 7% (annual coupon payments) and a face value of $1000. Andrew believes it can get a rating of A from
The minimum interest rate which investors demand for non-treasury securities is represented by the yield offered on the treasury securities. This is why market particip
A yield spread between any two bond issues can be easily computed when the maturity date for both these issues is same. The yield spread between these two bond
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The salem company bond currently sells for $955 has a 12% coupon interest rate and $ 1000 par value pays interest annually an
Issuing Procedure Treasury bills are sold using the auction procedure. The Treasury entertains both competitive and non-competitive tenders for T-Bills. Government securities f
The first involved the creation of spreadsheets to resolve some problems for an organization. You will need to model the problem roughly before you start to spreadsheet and you wil
Rationale for Mergers Many of the motives behind mergers of firms are discussed hereunder: Growth Growth is the most general and important motive for mergers. Merging f
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