## Capital Structure and Types Of Leverage

Capital Structure What Is Capital Structure? When you are asking about what the capital structure is and what it relates to what you will find is that it is regarding…

## NPV Decision Rule | Capital Budgeting Techniques

NPV Decision Rules - Capital Budgeting Techniques Net Present Value is defined as the present value of all expected cash flows generated by the project minus present value of the…

## Project Analysis | Accounting Rate of Return

Project Analysis – Capital Budgeting Techniques Nile’s Manufacturing is considering buying automated machinery that costs $250,000. Working capital requirement is $25,000 and they are expecting Annual cash savings of…

## Payback Period and ARR Example- Project Analysis

Project Analysis - Capital Budgeting Techniques Solved example of Payback Period and ARR Steve has been appointed as finance director of a company. His only aim is to gain some experience…

## Project Analysis | Capital Budgeting Techniques

Project Analysis - Capital Budgeting Techniques Net Present Value Example We are considering following project for investment purpose. Initial cost of the project: $800,000 Project Life:…

## Criticism on Capital Asset Pricing Model

Criticism on Capital Asset Pricing Model It is pertinent to mention here that the CAPM theory is about the real world; but it does not describe the real world fully.…

## Capital Asset Pricing Model (CAPM) Definition, Assumptions and Calculation

Capital Asset Pricing Model (CAPM) What is CAPM? CAPM Assumptions CAPM Formula How to calculate CAPM? Capital Asset Pricing Model CAPM stands for Capital Asset Pricing Model. Capital Asset Pricing Model (CAPM) defines…

## Why people invest in stocks?|Capital Budgeting Techniques

Why people invest in stocks? Investors buy, hold and sell financial assets to earn returns on them. Within the spectrum of financial assets, why do some people buy common stocks…

## Discounted Cash Flows

Discounted Cash Flows - Capital Budgeting Techniques We have discussed earlier that accounting rate of return & payback period ignores time value of money and cash flow trends. Means cash…

## Accounting Rate of Return (ARR) | Capital Budgeting Techniques

Accounting Rate of Return - Capital Budgeting Techniques Accounting rate of return is the project evaluation technique which differs from other capital budgeting techniques because the focus of this technique is…

## Difference between Annuity Due and Ordinary Annuity

Annuity Due and Ordinary Annuity - Capital Budgeting Techniques We often encounter situations where we have multiple cash flows of same amount. A very common example of such cash flows is…

## How to Calculate NPV | Capital Budgeting Techniques

How to Calculate Net Present Value For example we are planning of starting a business of producing and selling ;We can estimate the initial cost with reasonable accuracy because we know…

## How to Calculate Discounted Payback Period | Capital Budgeting Techniques

How to Calculate Discounted Payback Period For calculating discounted payback period (DPP), we will calculate the present value (PV) of each cash flow (CF) starting from the first year as…

## How to Calculate Payback Period | Capital Budgeting Techniques

How to Calculate Payback Period-Capital Budgeting Techniques Payback period is calculated by capital invested in the project by the net annual cash flow. Average of net annual cash flows may…

## Independent and Mutually Exclusive Projects

Independent and Mutually Exclusive Projects Understanding of classification of capital budgeting projects plays a crucial role while analyzing viability of projects. What is mutually Independent Projects? A Project whose cash flows…