Q3. norman inc. is considering the following project with expected future after tax cash flows shown in the following table. You dont know the projects initial cost but you do know the projects conventional payback period is 2.5 years. Assume cost of capital is 12%. Year1 12,000 Year 2 10,000 Year 3 6000 Year 4 5000 a). Calculate NPV of the project b). Would you recommend the company to accept or reject the project on the basis of NPV? c). How high can the discount rate be before you reject the project based on NPV? Give your answe correct to 2 decimal places.
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
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