Question

In: Finance

can u give a formula that can be use using financial performance to calculate efficiency of...

can u give a formula that can be use using financial performance to calculate efficiency of cost of capital, capital structure, capital budgeting and mergers and acquisitions

Solutions

Expert Solution

Efficiency of cost of capital can be calculated by using the formula of asset turnover

Asset turnover= (Sales/total assets), it would be reflecting the total sales which are generated out of total assets which has been created by investment of capital.

We can use debt capital ratio and Debt Equity ratio in order to find out the capital structure.

Debt Capital ratio= (debt/ total Capital)

Debt equity ratio=( debt/ Equity)

formula to calculate the capital budgeting using net present value or internal rate of return.

NPV= (discounted present value of net cash inflow-discounted present value of net cash outflow)

Internal rate of return can be found out rate of return which will be equivalent to the overall break even.

Formula for calculation of mergers and acquisitions and efficiency in mergers and acquisition can be related to use of calculation of synergy benefits which is arising out of mergers and acquisitions and it will be calculated after deducting of net payment to overall value of the other company.


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