Question 20 Which of the following is correct? When evaluating mutually exclusive investments, we choose the one with a higher internal rate of return. If the internal rate of return of marginal investment is greater than the cost of capital, the additional investment is acceptable. The marginal internal rate of return analysis gives us the return on the additional investment. Question 21 When evaluating an investment, one should consider which of the following? Incremental change in net working capital Incremental change in capital outlay Incremental change in salvage value net of tax Incremental change in operating cash flow
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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