A project requires an investment cost of P 600 000 with 5 – year useful life, no salvage value, and uses straight – line method. Other data are the following: Expected sales revenue P 2 000 000 Out – of – pocket costs 1 600 000 Tax rate 40% Require: Net cash inflows Payback period Assume an investor wants a payback period of 3 years is the proposal acceptable? Why or why not?
Cost of Debt, Cost of Preferred Stock
This article deals with the estimation of the value of capital and its components. we'll find out how to estimate the value of debt, the value of preferred shares , and therefore the cost of common shares . we will also determine the way to compute the load of every cost of the capital component then they're going to estimate the general cost of capital. The cost of capital refers to the return rate that an organization gives to its investors. If an organization doesn’t provide enough return, economic process will decrease the costs of their stock and bonds to revive the balance. A firm’s long-run and short-run financial decisions are linked to every other by the assistance of the firm’s cost of capital.
Cost of Common Stock
Common stock is a type of security/instrument issued to Equity shareholders of the Company. These are commonly known as equity shares in India. It is also called ‘Common equity
A project requires an investment cost of P 600 000 with 5 – year useful life, no salvage value, and uses straight – line method. Other data are the following:
Expected sales revenue P 2 000 000
Out – of – pocket costs 1 600 000
Tax rate 40%
Require:
- Net
cash inflows - Payback period
- Assume an investor wants a payback period of 3 years is the proposal acceptable? Why or why not?
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