APC308 Financial Management: Cost of Capital, Capital Structure, Investment Appraisal Techniques

APC308 Financial
Management

Contents
Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
Question 1- Cost of Capital and Capital Structure......................................................................1
a. Book Value and Market Value Analysis.................................................................................1
b. Evaluation of the Total WACC Cost of Capital......................................................................3
c. Interpretations..........................................................................................................................4
d. The relationship between the organization's IRR and WACC grade......................................5
Question 2- Investment Appraisal Techniques............................................................................5
a. Computation of the payback period, the rate of return, the net present value, and the IRR
value.............................................................................................................................................5
ROI Value Evaluation..................................................................................................................6
b. The Influence of Investment Appraisal Approaches in Organizations....................................7
c. Benefits and Disadvantages of Capital Assessment Methodology in Industries.....................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Financial accounting is a subset of accounting that handles with expenditures, earnings,
capital, and mortgages (Commerford, Hatfield and Houston, 2018). Financial regime is a
management function wherein organization is in charge of conceptualization, implementation,
coordination, regulation, and evaluation. In ability to execute a corporate efficiency of operation,
the management must have a thorough knowledge of operational budget. Financial regimes often
include incorporating management strategies to the financial tools of the organization while also
playing a significant role in financial control. As a consequence, it is also essential to suggest
that monetary and social regimes are inextricably linked.
MAIN BODY
Economic design relates to the money foundation of an organization, which comprises of a
precise combination of debt and equity used by any entity to finance expansion and progress.
The term "capital framework" relates to the company's ownership rights and also a financial hold
on future income inputs and returns. The obligations of the organization come in the form of
stocks or loans.
The cost of capital is the required proportion of income on any enterprise or deal which the
owner must obtain. Whenever a number of executives or an analyst states the amount of
borrowing, they were talking to the modified median expenditure of capital. Larger companies
produce funds from either a portfolio of investments; include stocks, loans, as well as other
channels, rather than from a specific provider (Fan and Chatterjee, 2019). The overall expense of
capital estimated by taking into account all costs from multiple origins is known as the Generic
Average Pricing of Investing (WACC).
Question 1- Cost of Capital and Capital Structure
a. Book Value and Market Value Analysis
Calculation of Market value cost of
WACC
Refers to Value
Cost of equity 500000
cost of debt 500000
Overall Market Value 1000000