What is the percentage change in ROE realized by Universal when it exhibits a 25% debt ratio and its EBIT increases by 25%? O +26.98% O +25.00% O-27.68%

Q: Describe two generic strategies.

A: Strategy: The word strategy may also be regarded as generalship. It may be defined as the…

Q: What are the three steps of controlling?

A: Introduction: Controlling is referred as terminal management function because it takes place after…

Q: Describe the three-tier client-server model.

A: Client-Server Model: A client-server model can be defined as the architecture of distributed…

Q: Describe four signs that help indicate when ABC systems are likely to provide the most benefits.

A: Activity based costing is one of the methods of costing to identify the activities performed to…

Q: Give two definitions for enterprise value?

A: Enterprise Value is the measure of a company’s total value. It consider the entire market value of a…

Cost of Capital

Shareholders and investors who invest into the capital of the firm desire to have a suitable return on their investment funding. The cost of capital reflects what shareholders expect. It is a discount rate for converting expected cash flow into present cash flow.

Capital Structure

Capital structure is the combination of debt and equity employed by an organization in order to take care of its operations. It is an important concept in corporate finance and is expressed in the form of a debt-equity ratio.

Weighted Average Cost of Capital

The Weighted Average Cost of Capital is a tool used for calculating the cost of capital for a firm wherein proportional weightage is assigned to each category of capital. It can also be defined as the average amount that a firm needs to pay its stakeholders and for its security to finance the assets. The most commonly used sources of capital include common stocks, bonds, long-term debts, etc. The increase in weighted average cost of capital is an indicator of a decrease in the valuation of a firm and an increase in its risk.