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Determine the term- Component Cost and Composite Cost
A company may contemplate to raise desired amount of funds by different sources comprising preferred stock, debentures and common stocks. These sources constitute components of funds. Each of these components of funds includes cost to the company. Cost of every component of funds is designated as component or specific cost of capital. When these component costs are combined to conclude the overall cost of capital, it is considered as composite cost of capital, combined cost of capital or weighted cost of capital, composite cost of capital, so, represents the average of costs of each sources of funds employed by company.
Why do total assets equal the sum of total liabilities and equity? Explain. Assets = Liabilities + Equity Assets are the items of value that a business owns. Liabilities ar
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Measuring volatility is very important as it is a critical input in valuation models. In subsequent chapters we will see the importance of assumed volatilit
Disadvantages of IFRS 8 Reconciliations may be time consuming. Less comparable with other organisations, as every entity has a different way of running their business.
(a) Lonesome Gulch Mines has a standard deviation of 42% per year and a beta of 0.10. Amalgamated Copper has a standard deviation of 31% a year and a beta of 0.66.
How would you incorporate political risk into the capital budgeting process of foreign investment projects? One method is to adjust the cost of capital upward to imitate politi
Your research assistant went home early (rock concert related illness) and left you with the following table listing the expected returns, standard deviation, correlation with the
What are the primary reasons that companies hold cash? Companies hold cash to do necessary payments to take advantage of opportunities as they arise and to cover unforeseen eme
Suppose you can decrease the cash on hand and the company will require holding Net Working Capital (including cash) equal to 4% of the next year's sales going forward. This will r
What does it mean when we say that the correlation coefficient for two variables is -1? What does it mean if this value were zero? What does it mean if it were +1? Correlation is
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