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How does a change in the cost of capital affect the projects irr?
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If a corporation has projects that will earn more than the cost of capital should it ration capital?
Yes
What is The average cost associated with each additional dollar of financing for investment projects is?
the marginal cost of capital "B"
How do market rates and the company's perceived market risk impact its cost of capital?
How does the capital market affect corporate governance?
What do you understand by cost of capital?
cost of capital
What is the rate of return a firm must earn on its investment projects in order to maintain the market value of its stock?
cost of capital :)
If a corporation has projects that will earn more than the cost of capital should it ration capital?
Yes
How does the cost of capital financing techniques affect the organization?
.sarita
Suppose a firm estimates its cost of capital for the coming year to be 10 What are the reasonable cost of capital for an average risk project high risk and low risk?
In order to determine reasonable costs of capital for average, high and low risk projects the firm should develop risk-adjusted costs of capital for each category of risk based on the concept of divisional WACC. If a firm estimates that its cost of capital for the coming year will be 10%, the firm should use 10% as the basis for its average risk projects since the firm will need to achieve a minimum of a 10% return on all its projects. Typically, a high-risk project has the potential for higher returns and a low-risk project will typically yield lower returns. Therefore, the firm could set the cost of capital for its high-risk projects at 12% and the cost of capital for low risk projects at 8%. Since the average risk project has a 10% cost of capital, the overall risk of the firms projects will be equal to the 10% cost of capital. Similarly, if the firm's high-risk projects are particularly risky, they could be set at a 15% cost of capital and the low-risk projects will be adjusted down to a 5% cost of capital. The ultimate goal is that the portfolio of the firm's projects will achieve the required 10% return or greater so that the cost of capital to fund the projects is covered. The assignment of risk is somewhat subjective but it is better than not adjusting the risk at all.
Do you believe that a firm should use the same cost of capital for all of its projects?
no
What is The average cost associated with each additional dollar of financing for investment projects is?
the marginal cost of capital "B"
If the opportunity cost of capital for a project exceeds the projects IRR then the project has a NPV negative?
If the opportunity cost of capital for a project exceeds the Project's IRR, then the project has a(n)
How do market rates and the company's perceived market risk impact its cost of capital?
How does the capital market affect corporate governance?
How does depreciation affect the cost of capital?
Please refer to the following Web site for a complete explanation on how depreciation affects the cost of capital: http://en.wikipedia.org/wiki/Depreciation
What are the main elements in calculating cost of capital How would an increase in debt affect the cost of capital How would you identify the optimal cost of capital for an organization?
Capital is calculated by subtracting the business costs from the profits gained from products and services. An increase in debt would decrease the total capital by increasing business costs. The optimal cost of an organization is low debt and high credits.
What do you understand by cost of capital?
cost of capital
What is the meaning of capital cost?
what is capital cost
What is the concept of marginal cost of capital?
The marginal cost of capital (MCC) is the cost of the last dollar of capital raised, essentially the cost of another unit of capital raised. As more capital is raised, the marginal cost of capital rises.
