The article presents a method to compute the value of a flexible capital structure of a company. A company's value will be maximized when it operates at its optimal capital structure. The optimal capital structure is that mix of debt and equity that minimizes the company's cost of capital....
Answer to: Explain how to compute book value per common share and discuss how it can be used to analyze the financial condition of a corporation...
Now Mr. Hari Lal Ltd. knows that their dolls' cost must include Rs. 85,200 every month. Mr. Hari Lal Ltd. must compute the average fixed cost to establish the appropriate pricing per doll. Calculate Fixed and Variable Costs How Do You Calculate Fixed Costs Per Unit?
Performance Measurement:Average total assets are used to calculate important financial ratios such as Return on Assets (ROA). ROA indicates the company’s ability to generate profits from its invested assets. By comparing the company’s net income to its average total assets, investors and analysts...
The weighted average cost of capital -- WACC -- is a company's weighted average cost of equity and cost of debt. The cost of equity is the risk-free rate plus a risk premium. The cost of debt is equal to the tax-adjusted yield of a long-term bond held to
Step 2: Weighted Average Number of Shares Outstanding In our example, there are no instances of common share issuance or repurchase. Therefore, the weighted average is equal to the number of shares outstanding: 800,000 Step 3: Apply the Basic EPS formula ...
The cost of equity applies only to equity investments, whereas theWeighted Average Cost of Capital (WACC)accounts for both equity and debt investments. Cost of equity can be used to determine the relative cost of an investment if the firm doesn’t possess debt (i.e., the firm only raises...
Capital Employed = Share Capital + Reserves and Surplus + Long-Term Borrowings = 400000+100000+150000 = 650000 As we have read above, in the absence of a universally accepted definition, we can also use a few other approaches to compute it, e.g., ...
thetime valueof money,terminal value,salvage value. and thediscount ratethroughout the project which is usually the weighted average cost of capital (WACC). It's a core component of corporate budgeting.
Another method for adjusting returns for cash flows is theinternal rate of return(IRR), a discount rate that makes the net present value of all cash flows zero. Using a financial calculator or spreadsheet software, you can quickly compute the IRR, which gives you an effective means for ...