1. Corporate Finance Corporate finance is the study of how companies raise capital to fund their operations and growth. Companies need money to operate, and they get it by selling shares to investors. Investors want to make sure that they are getting a good return on their investment. There are many different ways that companies …
People usually get confused between IRR (internal rate of return) and WACC (weighted average cost of capital). In this post, we will explain the difference between IRR and WACC. IRR – Internal rate of return IRR is the discount rate that makes NPV =0. IRR tells us the annualized rate of return for a given …
There is no sure way of knowing if the stock market will crash. However, there are data such as the yield curves and equity risk premium that we can use to analyse and forecast. Yield Rates & Maturity In explaining the shape of the yield curves (the relationship between interest rates and maturity), one should …
Market risk premium is the difference between the expected return on a market portfolio generally represented by a proxy such as S&P500 and the risk-free rate generally represented by the short term treasury rate. In formula wise, it is represented by: E(R)m – Rf where E(R)m represents expected return of the market stock and Rf …
A firm is considering a new project which would be similar in terms of risk to its existing projects. The firm needs a discount rate for evaluation purposes. The firm has enough cash on hand to provide the necessary equity financing for the project. Also, the firm: has 1,000,000 common shares outstanding current price $11.25 …
Finance is … — a subfield of economics where the primary focus is on the working of capital markets and the supply and pricing of capital assets — about valuation of assets to know if it is worth buying / investing — estimating the price that you should pay now based on estimated future’s earning Need finance tuition in Singapore? …
Similarity — Both disciplines are concerned with a firm’s assets and liabilities Differences — Accounting emphasized on review and compliance focused historical data works on accrual concepts — Finance emphasized on valuation and decision-making focused on the future works on cash flow concepts ENGAGE FINANCE / …
The corporate objective of a manager in the study of finance is to: 1. Maximise the value of the company (ensuring high future cash flow)2. Maximise shareholder wealth (ensuring high stock price)Rationale:•Individuals are utility maximisers•Utility is a function of consumption•Consumption is a function of wealth•Utility maximising individuals wish to maximise their wealth•Individuals hold part of their wealth in the …
Question 1 $100 to be received at the end of 3 years is worth how much today, assuming a discount rate of a)10 per cent b)100 per cent c)0 per cent?Question 2At the end of 5 years, how much is an initial $500 deposit plus annual $100 payments worth, assuming an annual interest rate of a)10 per cent b)5 per …
Time Value of Money takes into account the present and future value of money when there is opportunity cost in the economy. Opportunity cost include the returns you would have gotten if you have invested the money somewhere else rather than keeping it under your bed. For instance, if I put $1000 into Bank A that offers …