The value of the required rate of return would be the same percentage. The investment will not be purchased by a buyer if the percentage is not fixed, solidifying the rate of return when the investment is sold. The value may be more, however, but not less.
Relationship btwn an investor's required rate of return and value pf security
required rate of return is the 'interest' that investors expect from an investment project. coupon rate is the interest that investors receive periodically as a reward from investing in a bond
bal amar pel
The increase in rate of return will make the investment more difficult to be accepted.
An increase in a firm's expected growth rate would normally cause its required rate of return to
The minimum Required Rate of Return should be calculated by looking at the rate of return that would be gained by putting money in a savings accounts that accrues interest at the current rate. If you investment is not projected to make more profit than that it does not meet the minimum Required Rate of Return.
expected rate of return
Question 4 How does the cost of debt differ from the required rate of return for bondholders?
Positive present value indicates a successful investment. In terms of rate of return, a positive present value basically indicates that returns will be higher than the specified rate of return. Zero present values mean returns will meet your specified rate exactly. Negative present values mean returns will be less than required.
If the required rate of return is 11 the risk free rate is 7 and the market risk premium is 4 If the market risk premium increased to 6 percent what would happen to the stocks required rate of return?
relationship between WACC and required rate of return.
Require Rate of Return is formulated as: Riskfree Rate + Beta(Risk Premium) Required Rate of Return = 4.25 + 1.4 (5.50) = 11.95%
The difference between the coupon rate and the required return of a bond is dependent upon the type of bond. Junk bonds will have the biggest difference between its return and the coupon rate.
Net Present Value (NPV) means the difference between the present value of the future cash flows from an investment and the amount of investment.Present value of the expected cash flows is computed by discounting them at the required rate of return. For example, an investment of $1,000 today at 10 percent will yield $1,100 at the end of the year; therefore, the present value of $1,100 at the desired rate of return (10 percent) is $1,000. The amount of investment ($1,000 in this example) is deducted from this figure to arrive at net present value which here is zero ($1,000-$1,000).A zero net present value means the project repays original investment plus the required rate of return. A positive net present value means a better return, and a negative net present value means a worse return.
Difference enters bond's coupon interest rate the current yield y bondholder's required rate of return?
Internal rate of return is the rate at which your future cash flow when discounted equals to the present value of your investment or proposed investment.
then it is a good buy =-) To put it simply.
Expected return= risk free rate + Risk premium = 11 rate of return on stock= Riskfree rate + beta x( expected market return- risk free rate)
Internal rate of return, net present value, accounting rate of return and payback method.
4.25 + 1.4(5.5) = 11.95 = required rate of return the correct answer is: 4.25 + 1.4 (5.50-4.25) = 21.75
if a companys stock prices goes up and nothing else changes, the required rate of return should
What constitutes a constant growth stock is a stock that has dividends that are expected to grow at a constant rate. The formula used to value a constant growth stock is determined by the estimated dividends that will be paid divided by the difference between the required rate of return and growth rate.