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Importance of Minimization of the Cost of Capital

   

Added on  2020-04-01

14 Pages1659 Words99 Views
Finance
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Running Head: Financial analysis1Financial analysis
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Financial analysis2Table of ContentsPart-A..........................................................................................................................................................2After Tax Cash Flows................................................................................................................................2Worst case...............................................................................................................................................5Best case..................................................................................................................................................8Payback Periods....................................................................................................................................11Discounted Payback Periods..................................................................................................................14Net Present Value..................................................................................................................................17Profitability Index..................................................................................................................................20Other Capital Budgeting Technique.......................................................................................................21Decision on Acceptance of Project........................................................................................................21Part-B.........................................................................................................................................................22Executive summary...................................................................................................................................22Introduction...............................................................................................................................................23Comparing Firm’s Capital Structure.......................................................................................................23Analysis of Financial Ratios of AMC Outdoor Company.........................................................................26Significant Changes in the Capital Structure in Past Three Years...........................................................26Wealth Maximization in Past Three Years.............................................................................................27Importance of Minimization of the Cost of Capital................................................................................28Recommendations for Lowering the Cost of Capital.............................................................................28Conclusion.................................................................................................................................................29References.................................................................................................................................................30
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Financial analysis3Part-BExecutive summary This report reflects the financial analysis of APN Outdoor Company and its businessperformance in the market. There are several financial tools which could be used by investors toevaluate the three years business performance of APN Outdoor Company. In this report, it isshown that company has shown high amount of growth and effective business functioningthroughout the time. Capital structure analysis and ratio analysis of company will reflect the riskand return provided by company.
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Financial analysis4Introduction This report reflects the key understanding on the financial performance of APN OutdoorCompany in the market. There are several financial tools such as capital structure analysis andratio analysis and other tools which are used to evaluate the financial performance of APNOutdoor Company. This company has been running its business in Australia and providingadvertisement business. In this report, capital structure and financial performance of APNOutdoor Company has been evaluated to determine the viability of business functioning ofcompany throughout the time.Comparing Firm’s Capital StructureCapital structure is accompanied with equity, debt and reserve of company which is usedby company to raise finance from the market. If company wants to increase the efficiency ofbusiness then management department needs to establish optimum capital structure. Ideal capitalstructure of company should be 30 % debt and 70% equity (Finance. Yahoo, 2017). If companyis having more than 30% debt funding in its capital then it will increase the overall financial riskof company. APN Outdoor Company has to maintain its debt funding below 30% to reduce theoverall financial leverage. The computation of WACC of company has been computed as below(Gitman, Juchau, & Flanagan, 2015).Cost of EquityCAPM ModelRisk free rate of2.40%
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