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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.
Advantages and disadvantage of pacipatory style of budgeting
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
Explain Composite Currency Bond Composite currency bonds are denominated in a currency basket, like SDRs or ECUs, in place of a single currency.They are often known as currency
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5 Define risk. Examine the need for assessing the risks in a project.
Q. Importance of Capital Budgeting Decision? 1. Such Decision affect the profitability of the Firm: - Capital Budgeting decision influences the long-term profitability of a fir
Under what circumstances would market to book value ratios be misleading? Explain. The Market to Book ratio is helpful, however it is only a irregular approximation of how li
Uses of operating cycle in business
We can compute any forward rate using the spot rate. When we tell 3 years forward rate 4 years from now, there are two elements to consider. One is the length of
Q. Application of concept of TVM Sometime the financial manager has to deal with the varying situation of the decision making where the concept of TVM needs to be applied in th
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