F|N2101 Business Finance‖
FIN2101 Business Finance II
Module 9 Investment and Financing Decisions
Module 9 Investment and Financing Decisions
Student Activities Reading Study Book, Module 9 Selected Reading 9.1 Tutorial Activities Tutoria/ Workbook. Self Assessment Activity 9.1
Student Activities Reading • Study Book, Module 9 • Selected Reading 9.1 Tutorial Activities • Tutorial Workbook, Self Assessment Activity 9.1
Introduction The cost of capital is used to discount after tax cash flows expected from a firm's investment decision This. in turn determines whether the investment should be accepted or rejected according to the value it Is expected to create Cost of capital is thought of as the rate of return required by the market suppliers of capital in order to attract their funds to the firm
Introduction • The cost of capital is used to discount aftertax cash flows expected from a firm’s investment decision. This, in turn, determines whether the investment should be accepted or rejected according to the value it is expected to create. • Cost of capital is thought of as the rate of return required by the market suppliers of capital in order to attract their funds to the firm
Introduction Does the financing mix affect the firms overall cost of funds, either favourably or unfavourably? MM say No- financing decisions are irrelevant Firms should therefore concentrate on the nvestment decisions
Introduction • Does the financing mix affect the firm’s overall cost of funds, either favourably or unfavourably? • MM say NO - financing decisions are irrelevant. • Firms should therefore concentrate on the investment decisions