Podcast
Questions and Answers
What is the payback period for a firm with a capital expenditure of F 40,00,000 and cash inflows after tax (CFAT) of F 5,00,000 per annum?
What is the payback period for a firm with a capital expenditure of F 40,00,000 and cash inflows after tax (CFAT) of F 5,00,000 per annum?
What is the cost of perpetual preference shares with a face value of &200 each, assuming no tax, if they have a 12% dividend rate?
What is the cost of perpetual preference shares with a face value of &200 each, assuming no tax, if they have a 12% dividend rate?
What does financial leverage refer to?
What does financial leverage refer to?
What are the objectives of cash management?
What are the objectives of cash management?
Signup and view all the answers
How much should a person save annually to accumulate $1,00,000 for his daughter's marriage by the end of 10 years at an interest rate of 8%?
How much should a person save annually to accumulate $1,00,000 for his daughter's marriage by the end of 10 years at an interest rate of 8%?
Signup and view all the answers
Study Notes
Capital Budgeting
- The payback period is the time it takes for a firm to recover its capital expenditure from the cash inflows after tax (CFAT).
Cost of Capital
- The cost of perpetual preference shares is calculated as the dividend rate divided by the face value of the shares, assuming no tax.
- In this case, the cost of perpetual preference shares is 12% (dividend rate) divided by ₹200 (face value).
Financial Leverage
- Financial leverage refers to the use of debt to increase the profitability of a firm.
Cash Management
- The objectives of cash management are to manage the firm's cash flows to ensure liquidity and profitability.
Time Value of Money
- To accumulate a certain amount of money (e.g. $1,00,000) for a specific purpose (e.g. daughter's marriage) by the end of a certain period (e.g. 10 years), a person should save annually, taking into account the interest rate (e.g. 8%).
- The savings amount can be calculated using the formula for future value of a series of payments.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Description
Test your knowledge of financial management with this quiz covering topics such as objectives of financial management, time value of money, risk, payback period, retained earnings, and cost of preference shares. Put your financial acumen to the test and see how well you understand these essential concepts.
