Bad Credit History Do you know that a Bad Credit History can hurt your business badly? Bad credit report is a red signal to the businesses that they are exposed to possible bankruptcy. So, here we are going to discuss in detail about what Credit Report is and why is it important for firms to keep… Read More »
IRR Decision Rule IRR is one among a number of capital budgeting techniques which is most commonly used by the investors for evaluating their investment decisions. What is IRR? IRR is the discount rate on which NPV of a project becomes Zero OR we can define IRR as the discount rate at which Present Value… Read More »
Credit Risk and Credit Rating Credit Risk In today’s challenging business environment, it is very crucial for financial institutions to do risk assessment. Therefore, it is very important to know exactly what Credit Risk is and why it is important to ascertain it.
Capital Structure What Is Capital Structure? When you are asking about what the capital structure is and what it relates to what you will find is that it is regarding the debt and equity within a business environment. It is the amount of debt and equity that mixes together to give the amount of return… Read More »
NPV Decision Rules – Capital Budgeting Techniques Net Present Value is defined as the present value of all expected cash flows generated by the project minus present value of the cost of the project. Net Present Value = Present value of all expected cash inflows – Present value of the cost of the project
Project Analysis – Capital Budgeting Techniques Nile’s Manufacturing is considering buying automated machinery that costs $250,000. Working capital requirement is $25,000 and they are expecting Annual cash savings of $103,000 for 5 years. The company uses straight-line depreciation method. The salvage value the machinery at the end of year 5 is expected to be… Read More »
Project Analysis – Capital Budgeting Techniques Solved example of Payback Period and ARR Steve has been appointed as finance director of a company. His only aim is to gain some experience before moving to a larger company. His intention is to work here for three years and when he would leave the company; its share price… Read More »
Project Analysis – Capital Budgeting Techniques Net Present Value Example We are considering following project for investment purpose. Initial cost of the project: $800,000 Project Life: 5 years Annual Net Operation Profit:… Read More »
Criticism on Capital Asset Pricing Model It is pertinent to mention here that the CAPM theory is about the real world; but it does not describe the real world fully. Richard Roll, in the Journal of Financial Economics, argued that, because it is almost impractical to develop a portfolio that includes every single security (called… Read More »
Capital Asset Pricing Model (CAPM) What is CAPM? CAPM Assumptions CAPM Formula How to calculate CAPM? Capital Asset Pricing Model CAPM stands for Capital Asset Pricing Model. Capital Asset Pricing Model (CAPM) defines the relationship between risk and required returns in the security market and it is used in the pricing of risky securities. CAPM Model Assumptions 1. Mean-Standard… Read More »