- Calculate the premium value. F

Q: Define risk-adjusted cost of capital (r)

A: Risk adjusted cost of capital is the measure of returns of a project relative to the risks of a…

Q: Increasing interest expense will have what effect on EBIT?

A: EBIT stands for Earnings before Interest and Tax, the amount earned by the company from the…

Q: Compare the book value with the market price?

A: Book value is the amount of acquisition cost of asset, less accumulated depreciation as on a…

Q: _______ is a measure of risk while _______ is a measure of risk and liquidity.

A: Capital budgeting is the process of distributing the resources(finance) of the organization in…

Q: WHAT IS THE VALUE OF DISCOUNTED FLOWS

A: As per Time value of money, there are present values as well as future values.

Q: Create simple examples to illustrate the following concepts. i. Time value of money ii. Effective…

A: i) Time Value of Money: The concept of time value of money underlines that the value of money today…

Q: Give a definition of a "return". Why do we need to incorporate risk into return (discount rate)?

A: Investment: An investment is when money is used now with the goal of increasing its value later. In…

Q: Explain the effect of issuance cost on firm value.

A: There are issues cost associated with debt and equity that has impact on  value of firm.

Q: The CAPM model can be used to derive the cost сapital. A. Equity B. Borrowed С. Total D. Unlimited

A: The CAPM (capital assets pricing model) is a technique that helps to derive the cost of capital with…

Q: Write the capitalized-cost equation?

A: Answer: Capitalized cost is well-defined as the present value of an annual cost constant over an…

Q: Which payback method has a profit element?

A: Payback method is a capital budgeting technique which is used to evaluate various investment…

Q: Explain the sequential payout tranche structure?

A: Sequential payout tranche structure In this type of structure interest payments are received by…

Q: Define the terms, or give short explanations.         -percentage return -price discovery…

A: Risk and return are two essential concepts in finance that are closely related to each other. In…

Q: Explain payback period

A: Answer: Payback period is nothing but the time a company gets back the money that is originally…

Q: Define capital requirement ratio (CR)

A: Answer: Capital requirements are nothing but regulatory guidelines for banks that specify the amount…

Q: Explain price/cash flow ratio

A: Answer: Price to cash flow is determined through the division of price per share by cash flow per…

Q: The down payment or equity needed for this investment is $60,000 (outflow) Cash Flow $15,000 5,000…

A: Investment  $  60,000.00 Saving Rate 1.50% Loan Rate 8%

Q: Please explain the difference between the terms interest rate and required return by defining each.

A: The amount which is charged by the lender to the borrower in order the use assets is known as the…

Q: What is realized real interest rates? Give example.

A: realized real interest rate  = nominal interest rate - actual inflation rate realized real interest…

Q: What is the discounted-payback method?

A: Payback period states the number of years that is taken by the project to recover the investment of…

Q: The discount rate is the combination of what two types of discounting?   a. exponential and linear…

A: Discount rates are used for discounting the future cash flows. It helps in determining the time…

Q: What is liquidity premium (LP)?

A: Answer: Interest rate theory on liquidity premium is a significant concept in bond investment. It…

Q: Define Purchase return.

A: Financial accounting is the process of recording, summarizing, and reporting all the transactions in…

Q: What is limitation of Payback period, Net Present Value (NPV) and Internal rate of return (IRR).…

A: i) Payback period: Payback period is the expected time period which is required to recover the cost…

Q: What does HPR stand for? O a. Holding Period Return O b. House Price Return O C. Holding Power…

A: Abbreviation is a shorter form of words or phrase. The shorter form of word is used instead of whole…

Q: The internal rate of return is: discount rate that makes the profitability index (PI) greater than…

A: IRR and PI are important tools of capital budgeting along with NPV. IRR refers to the internal rate…

Q: Explain Total Return Swap?

A: Swaps are agreement between different businesses and financial institutions  which is customized as…

Q: Define each of the following terms: c. Net present value (NPV) method; internal rate of return (IRR)…

A: Net present value (NPV) is the contrast between the present value of money inflows over some…

Q: Define Capital Market Line (CML)

A: Introduction: Risk refers to the degree of volatility involved in the anticipated return on…

Q: Why is profit shown on liabilities side?

A: This is because of separate entity principle of accounting which says that the owner and business…

Q: The modified internal rate of return (MMIR) is the discount rate that forces the _____.

A: Explanation: Modified internal rate of return can be better understood from the below formula, where…

Q: a) DEFINE the following terminologies: i. Present value ii. Future value iii. Period iv. Interest…

A: In the given question we need to explain following terminologies: i. Present valueii. Future…

Q: what is payback period

A: Capital Budgeting: It is the planning process used to determine whether an organization invests in a…

Q: Define Capital Asset Pricing Model (CAPM)

A: The CAPM or capital asset pricing model is considered to be a popular concept in finance. The main…

Q: Define target payout ratio

A: SOLUTION:- A target payout ratio is a degree of the proportion of a company's profits it would want…