Explain how the cost of capital serves as a screening tool when using (a) the net present value method and (b) the internal rate of return method.

Q: What is the Capital Asset Pricing Model (CAPM)?What are the assumptions that underlie themodel?

A: The CAPM is an equilibrium model which stipulates the association among required rates of return and…

Q: calculate the capitalized value

A: Capitalized Value is the actual amount of an asset. It is considered when there is ownership of an…

Q: Differentiate between agency theory and pecking order hypothesis of capital structure. In each case,…

A: Agency theory:-This theory main aim is to resolve disputes over pritorizing different sources of…

Q: Write the capitalized-cost equation?

A: Answer: Capitalized cost is well-defined as the present value of an annual cost constant over an…

Q: What is the goal of capital structure management?

A: In simple words, capital structure management refers to the process under which the managers take…

Q: What is the weighted average cost of capital (WACC) and its significance?

A: Weighted average cost of capital (WACC): When a firm's weighted average cost of capital (WACC) is…

Q: Describe the logic underlying the use of target weights to calculate the weighted average cost of…

A: WACC is the method to calculate the cost of capital of a company by giving weightage to the sources…

Q: Explain how the cost of capital serves as a screening tool when using the net present value method.

A: Definition: Net present value method: The net present value method is the method that is used to…

Q: What exactly is the analytic hierarchy process (AHP) and how can it be used to the process of making…

A: ANALYTIC HIERARCHY PROCESS: It is the method for managing and identifying, organizing the complex…

Q: Discuss the advantages and disadvantages of using (a) payback, (b) net present value and (c )…

A: Payback Period: It refers to the period in which the project's or investment's initial cost is…

Q: How to use internal rate of return to make capital investment decisions.

A: Capital investment analysis: Capital investment analysis is the process of decision making, planning…

Q: why net present value is considered to be superior to internal rate of return as an investment…

A: Investment- The purchase of an asset in order to generate income or capital gain is referred to as…

Q: Describe the process of making Capital-Expenditure Decisions?

A: Capital Expenditure Decisions include those decisions which require deciding on the purchase of…

Q: What is the difference between VaR as it has been traditionally measured and stressed VaR? Explain…

A: A definition of value at risk is as follows: Value at Risk (VaR) is a metric that estimates the size…

Q: How do we get the weighted average cost of capital if not given in the question?

A:

Q: What is a capitalization rate? What are the different ways of arriving at this rate for an…

A: Capitalization rate: Capitalization rate is the projected rate of return percentage that a property…

Q: In the case of the net present value technique, explain how the cost of capital is used as a…

A: The question tells about the net present value technique and  how the cost of capital is used as a…

Q: Describe the affects of the present value of an investment.

A: Present value of the investment: Present value of the investment is calculated using the cash flows…

Q: What information does the payback convey that is absent from the other capitalbudgeting decision…

A: Payback period method is a traditional method used in capital budgeting decisions which is used to…

Q: The cost of capital is a hurdle rate. Is this statement true? Why or why not?

A: The question is based on the concept of minimum required rate for any project . Hurdle rate is the…

Q: Explain the problem of a capital-investment?

A: For the financing of capital investment, generally, the company considers operating cash flow of its…

Q: Explain how the cost of capital may be used as a screening tool when applying the net present value…

A: Net present value: Net present value is a the increment return from an investment after covering the…

Q: Explain how a gain or loss on disposal is handled in a capital-budgeting analysis.

A: Capital budgeting: Capital budgeting is a process by which the management can plan and evaluate the…

Q: Discuss the pros and cons of the accounting rate of return as an investment criterion.

A: Definition: Average rate of return method: The average rate of return is the amount of income that…

Q: Choose the correct.Cost of capital is helpful in corporative analysis of various:  A. Source of…

A: Answer:   Option A.

Q: How can the Calculation of capital-recovery cost (with return)be done?

A: Capital Recovery Cost: When a company purchases or invest in some assets for the business…

Q: What exactly is the analytic hierarchy process (AHP) and how can it be used in the context of…

A: The Answer:

Q: ith the use of an example, briefly explain the main difference between the ex-ante and the ex-post…

A: Main Difference between ex-ante and the ex-post opportunity cost of capital: Ex-post risk is…

Q: Explain the difficulties for determining the cost of capital in the short term decision making.

A: Introduction: Capital structure relates to financing of the overall activities and development of a…

Q: How to make capital investment choices based on the internal rate of return (IRR)

A: Capital investment choices based on the internal rate of return (IRR) will be explained:

Q: asset

A: The term CAPM or capitam asset pricing model is a model which shows the relationship between risk…

Q: How is each type of risk used in the capitalbudgeting process?

A: Risks in capital budgeting is nothing but uncertainty about the future profitability of a project.…

Q: Why should both quantitative and qualitative factors be considered in capital investment decisions?

A: The Investment commitment on any project is based on many factors which are classified as…

Q: Define the terms “book-value capital structure,” “market-value capital structure,” and“target…

A: Book value capital structure refers to the relative proportion of common stock, preferred stock,…

Q: Why is the compressed adjusted present value approachappropriate for situations with a changing…

A: Compresses Adjusted Present Value shows Net Present Value(NPV) of a project after considering the…

Q: Explain the relationship in formula Capital Assets Pricing Model

A: Capital Asset Pricing Model (CAPM): Capital Asset Pricing Model (CAPM) measures the relationship…

Q: The third step for making a capital investment decision is to establish baseline criteria for…

A: In order to establish baseline criteria for alternatives for making capital budgeting decisions, the…

Q: Explain the concept of capitalization effects?

A: Capitalization means recording an expense or cost on the assets side of the balance sheet and…

Q: is CAPM, Sharpe ratio, Treynor measures and Jensen’s Alpha used to Evalua

A: Step 1   Portfolio management involves trading between risk and return. Most novice investors make…

Q: What is the analytic hierarchy process (AHP), and how can it be used in making capital…

A: Capital Budgeting:  It refers to the long term investment decisions that has been taken by the top…

Q: Define the term, the return on invested capital (RIC)?

A: All investments are made keeping focus on the expected returns that can be generated from it. The…

Q: What is Capital gearing and how might it be calculated?

A: Meaning of Capital Gearing  Capital gearing is the ratio between total equity and total debt ( Fixed…

Q: how is the capital asset pricing model how is the model used in practice? please give some…

A: In finance we often use the Capital Asset Pricing Model (CAPM). This model essentially outlines the…

Q: Which of the following is a present value method of analyzing capital investment proposals? Uaverage…

A: Cost Accounting: It is the process of collecting, recording, analyzing the cost, summarizing cost,…