Your firm is looking at 3 projects, each costing $500,000: A is estimated to save $125,000 per year for 5 years; B is estimated to save $75,000 for 6 years plus generate tax savings of $20,000 per year; C is estimated to save $75,000 per year for 10 years but requires additional corporate overhead of $10,000 per year. (a) Compare the cash flows for the 3 projects and choose all that will meet your decision rule at a corporate cost of capital of 12.0 %. (b) What changes if the cost of capital rises to 15.0%? (c) If we deduct income taxes of 25% on the net savings; does this change your results? (d) if 2 projects like these both have acceptable NPV but only 1 can be accepted, which one do you select?
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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