Capital structure and Periodic discount rate: Difference between pages

Revision as of 10:43, 25 October 2015

A rate of return - or cost of borrowing - expressed as:

GBP 1 million is borrowed.

GBP 1.03 million is repayable at the end of the period.

The periodic discount rate (d) is:

(End amount - start amount) / End amount

= (1.03 - 1) - 1.03

= 0.029

= 2.9%

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-Capital structure refers to the sources of capital for a firm as well as the proportion in which they are present.
+A rate of return - or cost of borrowing - expressed as:
-This term is also used in a simpler way to refer to the relative proportions of equity and debt within the firm’s long-term capital.
+*The excess of the amount at the end over the amount at the start
+*Divided by the amount at the end
-== See also ==
+==Example==
-* [[Capital]]
+GBP 1 million is borrowed.
-* [[Corporate finance]]
-* [[Equity]]
-* [[Modigliani and Miller]]
-* [[Optimal capital structure]]
-* [[MCT]]
-[[Category:Corporate_finance]]
+GBP 1.03 million is repayable at the end of the period.
+The periodic discount rate (d) is:
+(End amount - start amount) / End amount
+= (1.03 - 1) - 1.03
+= 0.029
+= 2.9%
+==See also==
+*[[Annual effective rate]]
+*[[Discount rate]]
+*[[Periodic yield]]
+*[[Yield]]