Nicholson Roofing Materials, Inc., is considering two mutually exclusive projects, that both cost $100,000. The company's board of directors has set a 4-year payback requirement the cost of capital is 10%. The project cash flows are shown in the following table: Cash flows (CF Subscript t) Year Project A Project B 1 $30,000 $85,000 2 $30,000 $50,000 3 $30,000 $10,000 4 $30,000 $10,000 5 $30,000 $10,000 6 $30,000 $10,000 a. Calculate the payback period for each project. Rank the projects by payback period. b. Calculate the NPV of each project. Rank the project by NPV. c. Calculate the IRR of each project. Rank the project by IRR. d. Make a recommendation.
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
Nicholson Roofing Materials, Inc., is considering two mutually exclusive projects, that both cost $100,000. The company's board of directors has set a 4-year payback requirement the cost of capital is 10%. The project cash flows are shown in the following table:
|
|
Cash flows
(CF Subscript t)
|
|
|
Year
|
Project A
|
Project B
|
|
1
|
$30,000
|
$85,000
|
|
2
|
$30,000
|
$50,000
|
|
3
|
$30,000
|
$10,000
|
|
4
|
$30,000
|
$10,000
|
|
5
|
$30,000
|
$10,000
|
|
6
|
$30,000
|
$10,000
|
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