Chapter 7: Cost of Capital

Short Question Answer 1. What is the significance of marginal cost of capital in decision making? Explain. Marginal cost of capital is the cost of raising an additional rupee of capital. In other words, it is the cost incurred for raising incremental funds. Thus, the weighted average cost of incremental capital is known as the […]

Stock Valuation

Chapter 6: Stock Valuation

Short Question Answer 1. What are the characteristic features of preference share? Preferred stock is a hybrid security issued by companies. It is called hybrid security because it has some features common to debt and others similar to common stock. The rate of dividend to be paid on preferred stock is fixed and it generally […]

Chapter 4 : Risk and Return

Short Questions Answer Beta coefficient  Beta coefficient, denoted as ßj, is the measure of diversifiable risks. This is defined as the degree of movement in an asset or security’s return in response to the overall market return. Symbolically, it is expressed as. j=COVjM / Varm Where, j = Beta coefficient for security ‘j’. COVjM = […]