Explain the Criticisms of the Modigliani and Miller and traditional two theories on capital structure.

Q: What's the difference between the capital asset pricing model and modified capital assset pricing…

A: Capital Asset Pricing Model CAPM describes the relationship between systematic risk and expected…

Q: Capital Asset Pricing Model is based on certain assumptions, which have been criticized after…

A: Asset pricing is a linear function of the beta value of market return: When the market returns…

Q: Differentiate between agency theory and pecking order hypothesis of capital structure. In each case,…

A: Agency theory:-This theory main aim is to resolve disputes over pritorizing different sources of…

Q: In general it argued that the lower of cost of market rule is supported most closely by which of the…

A: The lower of cost or market rule is related to valuing the inventory, the company should value the…

Q: the Capital Asset Pricing M

A: Explanation : In simple words, Capital asset pricing model for valuing the cost of capital contains…

Q: What is capital rationing, what conditions lead toit, and how should it be dealt with?

A: Capital budgeting is a process in which capital projects are assessed in terms of their viability…

Q: What is the principal objection to the payback method?

A: The Payback period is one of the traditional or non-discounting techniques of Capital budgeting. It…

Q: What are the main criticisms of the Capital Asset Pricing Model (CAPM)? What does the empirical…

A: Capital Asset Pricing Model is a financial theory stating the linear relationship between required…

Q: State why payback analysis should be used only as a supplemental analysis tool when an economic…

A: Payback analysis is the method for calculating payback period of an investment. Payback period is…

Q: In the case of the net present value technique, explain how the cost of capital is used as a…

A: The question tells about the net present value technique and  how the cost of capital is used as a…

Q: Can CCC be negative? If so, what does it indicate?

A: “Hey, since there are multiple questions posted, we will answer first question. If you want any…

Q: What is the crossover rate, and how does its value relative to the cost of capital determinewhether…

A: Crossover rate is a rate where net present values of two mutually exclusive projects are equal to…

Q: How behavorial bias affect investment behavior?

A: Behavioral bias is the belief by the investors that unknowingly affects the investors investment…

Q: You want to argue against the taxation of interest income. a) Which simple interpretation of the…

A: Atkinson–Stiglitz-: The Atkinson–Stiglitz theorem is simply a theorem of public economics which says…

Q: What information does the payback convey that is absent from the other capitalbudgeting decision…

A: Payback period method is a traditional method used in capital budgeting decisions which is used to…

Q: The Capital Asset Pricing Model is usually adopted in a variety of circumstances but it does have…

A: Capital Asset Pricing Model: The relationship between expected return of a stock  and systematic…

Q: Explain what capital structure theory attempts to do and demonstrate useful lessons that can be…

A: Capital structure theory refers to a formulated and well-organized structure that reflects the…

Q: What does the empirical evidence say about capital structure theory? What are the implications…

A: Introduction: Capital structure relates to financing of the overall activities and development of a…

Q: Why can we not invest net income? Explain with an example?

A: The net income is the net profit of the company earned during the period. The net income includes…

Q: What is the trade-off theory of capital structure?How does it differ from MM’s theory?

A: Trade off theory of capital structure: This is a theory in which the company decides on the ratio of…

Q: What is the crossover rate, and how does it interact with the costof capital to determine whether or…

A: The rate at which the net present value (NPV) of 2 ventures is equivalent is the crossover rate…

Q: Why does net working capital appear with both negative andpositive values?

A: Working capital also known as net working capital is nothing but the difference between the current…

Q: Briefly discuss the differences between Modigliani and Miller’s theory of capital structure and the…

A: According to the M&M theory, a company's worth is unaffected by its capital structure or the…

Q: ructu

A: Traditional Theory of Capital Structure? The traditional theory of capital structure states that…

Q: Explain the concept of capitalization effects?

A: Capitalization means recording an expense or cost on the assets side of the balance sheet and…

Q: Define negative working capital. Is a negative working capital a sign of illiquidity or of…

A: Working capital is amount of temporary cash available for companies for timely payments of company…

Q: What is the Modigliani and Miller Capital structure theory and the assumptions of the theory? What…

A: The Modigliani-Miller theorem (M&M) states that the market value of a company is calculated…

Q: IN Capital Asset Pricing Model a) how is it used in practice  b) how important is this model c)…

A: Risk and return are the two inseparable parts of the investment. Before investing in any security,…

Q: Capital Asset Pricing Model  a) describe the model b) what are the assumptions in the model c)…

A: The capital asset pricing model describes the relationship between the expected return and the risk…

Q: Compare and contrast the "trade-off theory' and the "packing order theory" of capital structure

A: EXPLAINATION:- TRADE OF THEORY OF CAPITAL STRUCTURE The trade-off theory of capital structure…

Instruments of Foreign Exchange Market

Foreign exchange is a worldwide market in which one nation’s currency is converted into another nation’s currency. In further terms, exchanging of nations currency with foreign currencies. Foreign exchange happens at a specified rate which is termed the foreign exchange rate. The exchange rates are not constant continuously changing as they are derived by market forces of supply and demand. Widely used foreign currencies are the United States- dollar, Euro, Japanese Yen, British pound, and Australian dollar. US- dollar is the most denominated foreign currency. The Euro to US dollar is a widely used currency pair in the forex market as these two currencies represent the world’s enormous economy. Forex trade is simple as exchanging currencies at the bank. The main players of forex markets are the central banks, financial institutions, intermediaries, investments banks, and other banks. Central Bank is the supreme player who decides the currency value of their own nation on the forex market. Mostly foreign exchange-traded at FX market (forex market) when tourists’ visits a foreign country, import, and export happens between two countries.