Cost of Equity – Dividend Discount Model
Cost of equity can be worked out with the help of Gordon’s Dividend Discount Model. The model focuses on dividends, as the name suggests.… Read Article
Cost of Preference Share Capital
The cost of preference share capital is the dividend committed and paid by the company. This cost is not relevant for project evaluation because… Read Article
Models for Calculating Cost of Equity
The cost of equity can be defined as the required rate of return an investor would expect against supplying capital. The Expected rate of return… Read Article
Cost of Debt Capital for Evaluating New Projects – Yield to Maturity
The cost of debt is the interest cost that a firm would have to pay for borrowed capital. The interest cost at which the… Read Article
Weighted Average Cost of Capital (WACC)
Weighted Average cost of capital (WACC) is the minimum rate of return required to create value for the firm. Investors of equity, debt, preference… Read Article
Why Net Present Value is the Best Measure for Investment Appraisal?
“Why net present value (NPV) is the best measure for investment appraisal?” This question is as good as another question – “How NPV is… Read Article
Capital Rationing
What is Capital Rationing?Capital rationing is a technique of selecting the projects that maximize the firm’s value when the capital infusion is restricted. The… Read Article
Profitability Index (PI) or Benefit-Cost Ratio
Profitability Index (PI) is a capital budgeting technique to evaluate investment projects’ viability or profitability. Discounted cash flow technique is used in arriving at… Read Article
Payback Period (PBP)
The payback period (PBP) is an investment appraisal technique that tells the amount of time taken by the investment to recover the initial investment… Read Article
Modified Internal Rate of Return (MIRR) – The Solution to Multiple IRR
Modified internal rate of return is a solution to the shortcomings of internal rate of return as a project evaluation technique. There are two… Read Article
Advantages and Disadvantages of Internal Rate of Return (IRR)
The advantages and disadvantages of the internal rate of return are important to understand before applying this technique to specific projects. There must be… Read Article