The following information relates to three possible capital expenditure projects. Because of capital rationing, only one project can be accepted: Project Q P R Initial cost £250,000 £210,000 £190,000 5 Expected life (years) 4 5 Scrap value expected £20,000 £17,500 £12,000 Expected cash inflows £ £ £ End of year 175,000 90,000 60,000 2 70,000 70,000 65,000 3 65,000 55,000 70,000 4 60,000 80,000 75,000 5 55,000 80000 The company estimates its cost of capital is 14 per cent. Required: Calculate a) The payback period for each project. b) The accounting rate of return for each project. c) The net present value of each proiect.
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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