What is the crossover rate, and how does its value relative to the cost of capital determinewhether a conflict exists between NPV and IRR?

Q: Which of the following best represents the relationship between the weighted average cost of capital…

A: WACC is the weighted average cost of capital whereas MARR is minimum acceptable rate of return.

Q: Why might the weights of capital be different depending on whether book values,market values, or…

A: The weights of the capital should be different for book values of a equity, market value of a…

Q: Would the NPVs change if the cost of capitalchanged?

A: The NPV (Net Present Value) is entirely based on the value of the weighted average cost of capital…

Q: What is the capital asset pricing model (CAPM)? What does it tell us about the required return on a…

A: The required rate of return of a security is the minimum return an investor will demand from the…

Q: This is a generalized framework for analyzing the relationship between risk and return: a. capital…

A: Risk refers to the uncertainty related to the investment within the future. Risk arises within the…

Q: What is the difference of Cost of Equity and the required rate of return on equities?

A: The amount of money that would be transferred to a company's shareholders if all of the company's…

Q: the Capital Asset Pricing M

A: Explanation : In simple words, Capital asset pricing model for valuing the cost of capital contains…

Q: What is capital rationing, what conditions lead toit, and how should it be dealt with?

A: Capital budgeting is a process in which capital projects are assessed in terms of their viability…

Q: Explain the relationship between JENSEN's alpha and the security marketline of the Capital asset…

A: Jansen alpha indicates that how much risk adjusted returns by portfolio has been achieved by above…

Q: Why are market-based weights used instead of book-value-based weights when computing the weighted…

A: Market value is that present worth of the firm or any resource in the market on which it tends to be…

Q: Should firms focus on book value or market value capital structures? How would the calculatedWACC be…

A: In all actuality, the organization will have the option to utilize the capital structure dependent…

Q: Which of the following are two methods of analyzing capital investment proposals that both ignore…

A: Which of the following methods of evaluating capital investment proposals? Following four methods…

Q: The cost of capital is a hurdle rate. Is this statement true? Why or why not?

A: The question is based on the concept of minimum required rate for any project . Hurdle rate is the…

Q: What are the advantages of the free cash flow valuation modelrelative to the market multiple method?

A: Free cash flow describes the net cash provided from operating activities after making required…

Q: Generally, the ____ is considered to be a more realistic reinvestment rate than the ____.   a.…

A: Cost of capital is the required rate for make capital budgeting decision

Q: Payback period is one of the nondiscounting models used in capital investment decisions.  What are…

A: Payback period refers to the period in which the initial investment is recovered.

Q: If the internal rate of return (IRR) is less than the cost of capital, then the investment is…

A: False If the internal rate of return (IRR) is less than the cost of capital, then the investment is…

Q: What is the Capital Asset Pricing Model (CAPM)?What are some of its key assumptions? Has itbeen…

A: Capital Pricing Model (CAPM) is an investment theory that shows the relationship between the…

Q: Why is "Projecting Growth Beyond What the Capital Being Valued Will Support" considered a common…

A: Income Approach There are two different model which was incurred in the income approach.  The…

Q: What is the crossover rate, and how does it interact with the costof capital to determine whether or…

A: The rate at which the net present value (NPV) of 2 ventures is equivalent is the crossover rate…

Q: What is the capital asset pricing model (CAPM)? What are the assumptions that underlie the model?

A: Capital Asset Pricing Model is the most common security pricing model used in Finance. It is…

Q: Why does net working capital appear with both negative andpositive values?

A: Working capital also known as net working capital is nothing but the difference between the current…

Q: Why is the cost of capital sometimes referred to as a “hurdle rate”?

A: Cost of capital is the cost of financing a business, investment or a project. Cost of capital is…

Q: The user cost of capital does NOT depend on a. The real interest rate b. The unit price of capital…

A: The question is related to Cost of capital. The cost of capital is the minimum required rate of…

Q: Why is the compressed adjusted present value approachappropriate for situations with a changing…

A: Compresses Adjusted Present Value shows Net Present Value(NPV) of a project after considering the…

Q: What is market Value added? What is economic value added? What is the difference between what each…

A: Market value added is the amount of wealth that the company is able to create for its stakeholders.…

Q: What common assumptions do the Capital Asset Pricing Model (CAPM) and Arbitrage Pricing Theory (APT)…

A: Portfolio management is the process of encompassing the activities of investment in assets and…

Q: Compare capital budgeting decision criteria, Net Present Value (NPV) and Internal Rateof Return…

A: Part (a): Answer: Net present value approach predicts how much a future project would add to the…

Q: Does the signaling theory lead to the same conclusions regarding the optimal capital structure asthe…

A: The concept of signaling theory comes from the asymmetries of knowledge between management and…

Q: How can we invest in two assets with dissimilar return characteristics?

A: Diversification is one of the tactics to keep in mind while forming a portfolio. Investing all the…

Q: What are the two types of risk according to the Capital Asset Pricing Model? Which of the two types…

A: The Capital Asset Pricing Model (CAPM) describes the link between systematic risk and expected…

Q: What is the relationship between a discount rate (or IRR) and a capitalization rate? What causes…

A: Introduction: The discount rate is nothing but a rate that reduces potential cash flows in order to…

Q: Why is it more reasonable to assume, as the NPV rule does, that the intermediate cash flows are…

A: Before investing in new assets or projects, profitability is evaluated by using various methods like…

Q: What is the Modigliani and Miller Capital structure theory and the assumptions of the theory? What…

A: The Modigliani-Miller theorem (M&M) states that the market value of a company is calculated…

Q: Capital Asset Pricing Model  a) describe the model b) what are the assumptions in the model c)…

A: The capital asset pricing model describes the relationship between the expected return and the risk…

Q: Compare and contrast the "trade-off theory' and the "packing order theory" of capital structure

A: EXPLAINATION:- TRADE OF THEORY OF CAPITAL STRUCTURE The trade-off theory of capital structure…

Instruments of Foreign Exchange Market

Foreign exchange is a worldwide market in which one nation’s currency is converted into another nation’s currency. In further terms, exchanging of nations currency with foreign currencies. Foreign exchange happens at a specified rate which is termed the foreign exchange rate. The exchange rates are not constant continuously changing as they are derived by market forces of supply and demand. Widely used foreign currencies are the United States- dollar, Euro, Japanese Yen, British pound, and Australian dollar. US- dollar is the most denominated foreign currency. The Euro to US dollar is a widely used currency pair in the forex market as these two currencies represent the world’s enormous economy. Forex trade is simple as exchanging currencies at the bank. The main players of forex markets are the central banks, financial institutions, intermediaries, investments banks, and other banks. Central Bank is the supreme player who decides the currency value of their own nation on the forex market. Mostly foreign exchange-traded at FX market (forex market) when tourists’ visits a foreign country, import, and export happens between two countries.