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(^26) Financial Management Average Cost and Marginal Cost Average cast represents the weighted average of the costs of each sour ...

Cost of Capital^27 Similarly, explicit cost of retained earnings which involve no future flows to or from the firm is minus 100 ...

(^28) Financial Management of the cost of capital developed in this chapter is valid only for projects that do not change the fi ...

Cost of Capital^29 rj = the riskless cost of the given type of financing, j b = the business risk premium f = the financial risk ...

(^30) Financial Management specific type of financing for a firm is somehow functionally related to the riskless cost of that ty ...

Cost of Capital^31 Significance of the Cost of Capital It should be recognized at the outset that the cost of capital is one of ...

(^32) Financial Management Measurement Time Value of Money If an individual behaves rationally, then he would not equate money i ...

Cost of Capital^33 Future Value = (Investment or Present Value) * (1 + Interest) No. of time Periods The compound values can be ...

(^34) Financial Management Step 2: In the financial function category choose FV (it stands for Future Value) and press OK. Step ...

Cost of Capital^35 Step 4: Insert the values as given in the example. Here r = I = 0.05, Nper is the number of periods = 20, Pmt ...

(^36) Financial Management Future Value of an Annuity Annuity is defined as periodic payment every period for a number of period ...

Cost of Capital^37 done at the end of the period 1. Note that in the earlier case this also means that we get the returns at the ...

(^38) Financial Management Still this leaves one problem unanswered: If the projects have different time spans (which could be a ...

Cost of Capital^39 Solve this or use the present value table. Using the present value interest factor table we find that present ...

(^40) Financial Management Step 4: Insert the values as given in the example. Here r = I = 0.05, Nper is the number of periods = ...

Cost of Capital^41 If you can invest the amount at 5% per annum compounded annually what will be the amount you would require to ...

(^42) Financial Management ( 1 ) ( 1 ) [( 1 ) 1 ] Pr i i i i esentValue A n n  +      + + - = In the excel spreadsheet we ...

Cost of Capital^43 subject to various constraints, primarily risk. Return is the motivating force, inspiring the investor in the ...

(^44) Financial Management The price change over the period, is the difference between the beginning (or purchase) price and the ...

Cost of Capital^45 payments but in debt securities it is usually a lump sum payment at the end of the period (or a series of pay ...