Cost of Capital (MCC)
of obtaining another dollar of new capital; the weighted average cost
of the last dollar of new capital raised.
investor whose actions reflect the beliefs of those people who are currently
trading a stock. It is the marginal investor who determines a stock's
rate applicable to the last unit of a person's income.
consisting of all stocks.
at which a stock sells in the market.
of a security's risk that cannot be eliminated by diversification.
Risk Premium, RPM
return over the risk-free rate needed to compensate investors for assuming
an average amount of risk.
Value Added (MVA)
between the market value of equity and the amount of equity capital
that investors supplied.
of ratios that relate the firm's stock price to its earnings and book
value per share.
or Beta, Risk
of a project's risk that cannot be eliminated by diversification; it
is measured by the project's beta coefficient.
of a stock's market price to its book value.
that can be sold on short notice.
date on which the par value of a bond must be repaid.
Matching, or "Self-Liquidating," Approach
policy that matches asset and liability maturites. This is a moderate
Risk Premium (MRP)
which reflects interest rate risk.
of two firms to form a single firm.
Current Asset Investment Policy
that is between the relaxed and restricted policies.
rate at which the present value of a project's cost is equal to the
present value of its terminal value, where the terminal value is found
as the sum of the future values of the cash inflows, compounded at the
firm's cost of capital.
fund that invests in short-term, low-risk securities and allows investors
to write checks against their accounts.
markets in which funds are borrowed or loaned for short periods (less
than one year).
analysis technique in which probable future events are simulated on
a computer generating estimated rates of return and risk indexes.
backed by fixed assets. First mortgage bonds are senior in priority
to claims of second mortgage bonds.
or Global Corporation
that operates in an integrated fashion in a number of countries.
where a project has two or more IRRs.
issued by state and local governments.
of projects where only one can be accepted.
Cost of Capital (MCC) Schedule
that relates the firm's weighted average cost of each dollar of capital
to the total amount of new capital raised.
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