Day: October 5, 2020

The following models are used to establish the various costs of capital or required rate of return by the investors: Risk adjusted discounting rate Market model/investors expected yield Capital asset pricing model (CAPM) Dividend yield/Gordon’s model. i) Risk adjusted discounting Read More …

Interest rates have two effects on corporate profits: a) Because interest rate is a cost, the higher the rate of interest the lower the firm’s profit other things held constant. b) Interest rates affect the level of economic activities which Read More …

There are four most important factors that influence interest rates and the shape of yield curve. CBK – Monetary policy The level of government budget deficit Balance of trade position Business activity (circle) in the economy 1. CBK – Monetary Read More …

The term structure of interest rate describes the relationship between interest rates and the term to maturity and the differences between short term and long term interest rates. The relationship between short and long interest rates is important to corporate Read More …

Definition This is the price the company pays to obtain and retail finance. To obtain finance a company will pay implicit costs which are commonly known as floatation costs. These include: Underwriting commission, Brokerage costs, cost of printing a prospectus, Read More …

Definition This is the price the company pays to obtain and retail finance. To obtain finance a company will pay implicit costs which are commonly known as floatation costs. These include: Underwriting commission, Brokerage costs, cost of printing a prospectus, Read More …