Lecture # 2 Discussion
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@zaasmi said in Lecture # 2 Discussion:
Please tell what is the meaning of Cost of Capital & Debt Instruments.Thank you
Answer:
Capital may be raised by an organization either by issuing stocks/shares or bonds (debt). Cost of debt is the interest charges on debt while the cost of shares/equity refers to a shareholder’s required rate of return on equity investment. Cost of equity is the rate of return that could have been earned by putting the same money into a different investment with equal risk. Cost of equity may also include the expenses that are raised to issue the share in market e.g The Lawyer’s fee and Stock Brokers’ Commissions etc.Bond is a debt instrument under which the issuer owes a debt from its holders and obliged to pay them interest (the coupon) and/or to repay the principal at a later date, termed the maturity date. Organizations use to issue bonds in order to get money for investment. Individual/ institutions purchase those bonds by paying money to the organizations. Organizations are than liable to pay an agreed interest/ coupon to the bond holder at regular interval and also pay the principal amount upon the maturity of bond.
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Dear sir i want to ask a question about lecture no 2 is Preferred stock kindly explain this.
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@zaasmi said in Lecture # 2 Discussion:
Dear sir i want to ask a question about lecture no 2 is Preferred stock kindly explain this.
Preferred stock is called hybrid security because it has some features of stock and bonds. Normally, preferred stocks have fixed dividend like interest on bonds. Stockholders have a higher claim to dividend or asset distribution than common stockholders. The details of each preferred stock depend on the issue.
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sir in lecture 2 you explained that the objective of micro economics is to maximise wealth but sir micro economics deals with the individual decision making or behaviour, so in this prospect how micro economics can maximise wealth? or is it macro economics ?
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@zaasmi said in Lecture # 2 Discussion:
sir in lecture 2 you explained that the objective of micro economics is to maximize wealth but sir micro economics deals with the individual decision making or behavior, so in this prospect how micro economics can maximize wealth? or is it macro economics ?
Answer:
In lecture 2 objectives of economics have been discussed and when we talk about economics than it covers both macro and micro economics. Your concept about the macro and micro economics is correct but discussion was on general economics and not specifically about macro or micro. -
Please clarify our below some topic
- How do you calculate liquidation value?
- What is liquidation value with example?
- What is the difference between fair value and intrinsic value?
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@zaasmi said in Lecture # 2 Discussion:
How do you calculate liquidation value?
Liquidation value is the value of company’s physical assets in case when company’s assets are sold. For details of liquidation process consult following link:
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@zaasmi said in Lecture # 2 Discussion:
What is liquidation value with example?
Answer:
Fair value is the value of an asset that is determined by the market, a price that a buyer is willing to pay and seller is willing to accept. It is assumed that both the parties have complete knowledge and transaction is taking place in open market. -
@zaasmi said in Lecture # 2 Discussion:
What is the difference between fair value and intrinsic value?
Answer:
Intrinsic value is an anticipated value that is based on the fundamental analysis, the amount a rational investor is willing to pay for a security at a given level of risk. This fundamental or intrinsic value is based on discounted value of future cash flows attached with that security.