cost of capital

Tag: cost of capital

Return on Common Equity (ROCE)

Return on Common Equity (ROCE) Definition The return on common equity, or ROCE, is defined as the amount of profit or net income a company earns per investment dollar. The investment dollars differ in that it only accounts for common shareholders. This is often beneficial because it allows companies and investors alike to see what sort of

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Profitability Index Method Formula

See Also: Profitability Index Method Profitability Index Method Formula Explanation Use the following formula where PV = the present value of the future cash flows in question. Profitability Index = (PV of future cash flows) ÷ Initial investment Or = (NPV + Initial investment) ÷ Initial Investment: As one would expect, the NPV stands for the Net Present Value

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Net Present Value Method

See also: Valuation Methods Adjusted Present Value Method Internal Rate of Return Method Time Value of Money Capital Budgeting Methods Rule of 72 Net Present Value Definition Net Present Value (NPV) is defined as the present value of the future net cash flows from an investment project. NPV is one of the main ways to evaluate

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Make-or-Buy Business Decision

See Also: Company Life Cycle Market Positioning Marking to Market Mining the Balance Sheet for Working Capital Inventory to Working Capital Make-or-Buy Business Decision Make-or-buy decisions arise in business when a company must decide whether to produce goods internally or to purchase them externally. This typically is an issue when a company has the ability

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Economic Value Added

See Also: Activity Based Management Capital Structure Management How to collect accounts receivable How to manage inventory Why Exit Planning Economic Value Added Definition Economic value added (EVA) measures the effects of managerial actions. It also focuses on managerial effectiveness in a given year. Economic Value Added Formula Use the following formulas to calculate the

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Discounted Cash Flow Analysis

See Also: EBITDA Definition Steps to Track Money In and Out of a Company Arbitrage Pricing Theory Discount Rate Required Rate of Return (Discount Payback period) DPP Discounted Cash Flow Analysis Definition The definition of a discounted cash flow (DCF) is a valuation method used to value an investment opportunity. Discounted cash flow analysis tells investors

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Weighted Average Cost of Capital (WACC)

See Also: Capital Asset Pricing Model Cost of Capital Funding Arbitrage Pricing Theory APV Valuation Capital Budgeting Methods Discount Rates NPV Required Rate of Return Weighted Average Cost of Capital (WACC) Definition The weighted average cost of capital (WACC) definition is the overall cost of capital for all funding sources in a company. Weighted average cost

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Cost of Capital Definition

See Also: Arbitrage Pricing Theory Capital Budgeting Methods Discount Rates NPV Required Rate of Return APV Valuation Cost of Capital Definition The cost of capital definition is a company’s cost of funding. Depending on the company’s capital structure, the cost of capital will incorporate its cost of debt as well as its cost of equity.

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Bankruptcy Information

See Also: Chapter 7 Bankruptcy Chapter 11 Bankruptcy Bankruptcy Code Chapter 13 Bankruptcy Bankruptcy Costs Chapter 12 Bankruptcy Courts – Bankruptcy Bankruptcy is the legal condition of being unable to repay debts. It can apply to individuals or organizations. There are two types of bankruptcy: voluntary and involuntary. Voluntary bankruptcy occurs when the debtor, the party

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Capitalization Rate

See Also: Capitalization Rate Example Capitalization Annual Percent Rate (APR) Wage Rate Currency Exchange Rates Capitalization Rate Definition The Capitalization Rate definition is a formula which represents the difference between annual net operating income and cost of capital. Its use in the business world serves the main purpose of valuation, including the following: Ventures Single

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Capital Structure Management

See Also: Balance Sheet Cost of Capital Capital Asset Pricing Model Capital Budgeting Methods Net Present Value Method Capital Expenditures Organizational Structure Capital Structure Management A company’s capital structure refers to the combination of its various sources of funding. Most companies are funded by a mix of debt and equity, including some short-term debt, some

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Factoring: The Dreaded “F” Word

“The dreaded “F” word, FACTORING. Now we have identified the “F” word, I am sure we all are feeling a little more at ease. I was in a meeting recently with a prospect, a Houston based oilfield servicing company, and their CPA whose name was John. Factoring Example The company was experiencing cash flow problems

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