You are considering two projects. Project 1 currently costs $15 million, which is to be paid this year; the returns are $9 million after year 1 and $8. million after year 2. Project 2 currently costs $16 million, again to be paid this year; the returns are $10 million after year 1 and $9 million after year 2. At an interest rate of 7%, the present value of Project 1 is roughly project's costs.) while the present value of Project 2 is roughly (Note: The present value of a project is equal to the present value of the project's revenues minus the present value of the Suppose investing in one project eliminates the opportunity to invest in the other. If the interest rate is 7%, Project is preferable.
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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