3. Duqm Chemical Company is contemplating to invest in a new project which costs RO 100,000. The expected cash flow on this project under various scenarios are given below: State of Economy Probability End of year 1 (RO) 50,000 75,000 End of Year 2 (RO) 75,000 100,000 150,000 Recession 0.3 Growth 0.5 Boom 0.2 100,000 Assume that the state of the economy will be the same in the second year as in the first. The required rate of return is 8%. There is no tax or inflation. Required: 1. Calculate Expected NPV 2. Calculate the Standard Deviation of NPV 3. Appraise the management about this project with your comments. 4. Why we need to analyse the project risk at the time of evaluating capital budgeting.
Cost of Debt, Cost of Preferred Stock
This article deals with the estimation of the value of capital and its components. we'll find out how to estimate the value of debt, the value of preferred shares , and therefore the cost of common shares . we will also determine the way to compute the load of every cost of the capital component then they're going to estimate the general cost of capital. The cost of capital refers to the return rate that an organization gives to its investors. If an organization doesn’t provide enough return, economic process will decrease the costs of their stock and bonds to revive the balance. A firm’s long-run and short-run financial decisions are linked to every other by the assistance of the firm’s cost of capital.
Cost of Common Stock
Common stock is a type of security/instrument issued to Equity shareholders of the Company. These are commonly known as equity shares in India. It is also called ‘Common equity
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