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(^66) Financial Management that constitute the portfolio, the weights being the proportions of investments in respective securit ...

Cost of Capital^67 Mathematically the relationship between the share's return and the market return can be depicted by the follo ...

(^68) Financial Management 














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Cost of Capital^69 rate of return Rf and km - Rf is the slope of the SML. Since all securities are expected to plot along the SM ...

(^70) Financial Management On the other hand, Security Y with a beta of around 1.7 requires a rate of return of around 16% but i ...

Cost of Capital^71 For purposes of investment appraisal, the cash flow is the incremental cash receipts less the incremental exp ...

(^72) Financial Management The application of risk analysis enables management to answer the following questions: (1) What is th ...

Cost of Capital^73 Determining individual costs of capital a) Cost of Debt: As we discussed in the last chapter the before-tax c ...

(^74) Financial Management where NPo = the market price of the equity share less flotation costs incurred in issuing new shares. ...

Cost of Capital^75 a. Issuing new equity share will increase the firm's weighted cost of capital because external equity capital ...

(^76) Financial Management and equity. If the preference capital is also there then it is simply added to it the way other two a ...

Operating and Financial Leverage^77 One of the most important of the various financial decisions is how much leverage a firm sho ...

(^78) Financial Management help you understand the topic. This understanding should make it simpler to make appropriate choices ...

Operating and Financial Leverage^79 That depends. Suppose we sell each copy for 50 paise. Then, for each copy we sell we receive ...

(^80) Financial Management Suppose, however, that the property were sold after one year for Rs 70,000 rather than Rs 1,30,000. O ...

Operating and Financial Leverage^81 How Much Financial Leverage Is Enough In practice, the leverage decision is based on firm po ...

(^82) Financial Management For example, the petrochemicals industry, with its huge capital requirements has traditionally been h ...

Operating and Financial Leverage^83 Thus, when EBIT is Rs. 1,20,000, proposal B involving a total capitalisation of 75 percent c ...

(^84) Financial Management of the total funds, increase in EPS is little more than double the earlier level. This volatility of ...

Operating and Financial Leverage^85 This line shows the earnings per share associated with each level of EBIT. It is interesting ...