ppt

1. Quick Revision
MST - I

6. Time Value of Money

7. Formula’s
• Present Value:
• Future Value:

8. Sources of
Finance

9. Cost of Capital
• Components :
Return at Zero Risk
Business Risk Premium
Financial Risk Premium
• Computation of Cost of Capital :
I. Computation of specific costs. (Equity,
Debts, Preference, Retained Earnings)
II. Computation of composite cost. (WACC)

10. Capital Structure
Meaning:-
“Composition of
its capitalization
and it includes
all long-term
capital
resources”

11. Theories of Capital Structure
• Net Income Approach , V= S + D
• Net Operating Income Approach , V = EBIT/K
• Traditional Approach
• MM Approach:
If Taxes Ignored, then like Net Operating Income Approach
If Taxes Exist, then like Net Income Approach
V = EBIT/K (1-t)