CF

Cost of Capital or Discounting Factor: There are two kinds of capital, one is loan/debt and other is equity. How do we get discounting factor OR ‘Cost of Capital’? Here cost of debt can be known from the banks, but the cost of equity depends on the risk involved in the business…

Uncertainty Costs and problems with NPVs and IRRs: uncertainty in the costs because of the instability in various factors that are considered in the project costs. …

Working Capital, Cash Inflows and Cash Outflows: It is the minimum amount of money which is required to run the project. In financial accounting Working Capital is…

Profitability Index and its usage: This is one of the index used to evaluate if the project is feasible to execute or not. This is computed in two different ways..

Payback Period and Book Returns: Period required to get back initial investment (adjusted for time value). Decision Rule: Consider projects whose payback period is less than or equal to hurdle payback period…

Net Present Value and Internal Rate of Return: IRR is defined as (Sum of present value of all cash inflows) – (sum of present value of all cash outflows)…

Capital budgeting and Investment feasibility: from wiki Capital budgeting (or investment appraisal) is the planning process used to determine whether an organization’s long term investments such as new machinery, …

Time value of Money in Financial decisions: Financial decisions cannot be taken without considering time value of money. Basic Principle: A Rupee in hand today is always lot more valuable than the Rupee of tomorrow…

Agency Costs and role of Finance Manager: These arise because of lack of coordination OR conflict of interests between equity holders, debt holders and managers of the company…

Key issues in Finance Function- Assuring the Financial viability of Investments: 1. Acquire capital at low cost. 2. FM has to assess whether the project is viable or not.

Role of Finance Manager(FM); FM a Goal Keeper: Finance Function: One side of finance function is finance managers like HR Manager, Production Manager, Marketing Manager so on…

[This blog is captured from “Corporate Finance” class notes (by Prof M S Narasimhan . Some information referred from Wikipedia/other listed sites.]

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