Financial Management notes for BBA, B.Com, MBA & MSc in Finance – RBL Academy – Call at 8920884581
Estimation of Cash Flow in Capital Budgeting problems with solutions 1. The cost of a machine is 10, 00,000. It has an estimated life of 10 years after which it would be disposed off (scrap value nil). Profit or Earning before depreciation and taxes (EBDT/PBDT) is estimated to be 2, Read more…
Cost of Capital formula & Solved Problems on Cost Of Equity, Debt, WACC – Financial Management notes on Cost of Capital, Cost of Debt, Equity and Preference Share, Weighted Average Cost of Capital Illustrations Kd Ke Kp Ko Cost of capital represents the return a company needs to achieve in order to justify the cost of a capital project, such as purchasing new equipment or constructing a new building. Cost of capital encompasses the cost of both equity and debt, weighted according to the company’s preferred or existing capital structure. This is known as the weighted average cost of capital (WACC).
Leverage reflects the responsiveness or influence of one financial variable over some other financial variable. The relationship between sales revenue and EBIT is defined as operating leverage and the relationship between EBIT and EPS is defined as financial leverage. The direct relationship between the sales revenue and the EPS can be established by combining the operating leverage and financial leverage and is defined as combined leverage.