According to the net present value method of capital budgeting, which investment(s) should the firm make? b.) According to the internal rate of return method of capital budgeting, which investment(s) should the firm make? c.) If Q is chosen, the $1,300 can be reinvested and earn 12 percent. Does this information alter your conclusions concerning investing in Q and S? To answer, assume that S’s cash flows can be reinvested at its internal rate of return. Would your answer be different if S’s cash flows were reinvested at the cost of capital (10 percent)?
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
Investments Quick and Slow cost $1,000 each, are mutually exclusive, and have the following cash flows. The firm’s cost of capital is 10 percent (refer to image):
a.) According to the
investment(s) should the firm make?
b.) According to the
c.) If Q is chosen, the $1,300 can be reinvested and earn 12 percent. Does
this information alter your conclusions concerning investing in Q and S? To answer, assume that S’s cash flows can be reinvested at its internal rate of return. Would your answer be different if S’s cash flows were reinvested at the cost of capital (10 percent)?
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