Beruflich Dokumente
Kultur Dokumente
Ameena Mohamed
6573
Contents
• Introduction
• NPV
• IRR
• ARR
• Payback Period
• Benefits of corporate governance
• Conclusion
Introduction
discount rate to
project
find net present
evaluation in
value (NPV) of
business
cash flows.
sources of capital,
including common
stock, preferred
stock, bonds and any
other long-term debt
WACC
• Capital Asset Pricing Model (CAPM) • Formula for WACC
• Calculation of Cost of Equity (Re):
• 𝑪𝒐𝒔𝒕 𝒐𝒇 𝒄𝒂𝒑𝒊𝒕𝒂𝒍 =
𝐸
𝑅𝐸 +
𝐷
𝑅𝑑 +
• The below CAPM formula can be useful to 𝑃
𝑅𝑝
𝑉 𝑉
• Where:
• LDR = Lower discount rate = 10.08%
• HDR = Higher discount rate = 42%
• P1 = Present value at lower rate of interest = $546958.38
• P2 = Present value at higher rate of interest = $296,348.04
• = 41.53%
• IRR for this project is 41.53%
• . IRR could be different if the initial investment and cash flows are different.
• We want the IRR to be higher than the required rate of return to accept the project
• If IRR is greater than WACC,.
Average rate of return
Q&A