financial management doubt - on different rates comparison & meaning required

Started by upvncma, May 21, 2014, 07:15:41 pm

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relationship bw IRR vs ROE vs COE vs Cost of debt vs Cost of capital ??

can you differentiate & provide  meaningful comparison & concept?

Mr. Patel

Hi dear
Sorry for late reply.
Sorry i cnt reply u rght now.
I started my job @ itc and rght now i am not at my home.
I am roaming here and there in hotel to get settled.
So rght now i m busy in getting settled.
Soon i vl get settled,get my home,lappi and internet and then i vl regularly be online.

So sorry fot it hope u can understand.

I will reply  yr query when i vl b back at abad on 30 april.

Mr. Patel

IRR mean Internal Rate of Return.

See it is a evaluation techniques for evaluating the Investment oppurnities. I mean if you want to know whether you must invest or not then you can use the IRR.

In technical wording,IRR mean The discount rate often used in capital budgeting that makes the net present value of all cash flows from a particular project equal to zero.So at IRR the NPV is zero.

ROE: It mean Return on equity:

It mean the amount of net income returned as a percentage of shareholders equity. In simple word it is a return that a shareholder get by holding equity shares.

COE: Cost of Equity:

It refer to cost incurred for issusing the equity. That is it include all the cost that will be incurred by the company for issusing the equity shares. For example legal cost etc.

In simple word, it refer to cost for issusing the shares

COD: Cost of debts

It is similar to COE, the only difference is that it include cost incurred for issusing the debt.

Note: Please note that there is always some cost involved in issusing the shares and debts  (Bonds or debenture).

Cost Of Capital:

Cost of capital means average of above two that is COE and COD.

In short, it refer to WACC that is weighted average cost of capital.

It refer to the cost involved in raising the capital for the company including raising capital by debts and equity.

Hope you are cleared now.....

In case of any difficulty,leave a feedback over here

Mr. Patel

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