Modified internal rate of return (MIRR) is the adjusted rate of return to eliminate difference between investment rate and return. MIRR sorted out some issues in internal rate of return (IRR). MIRR tells about viability of the project. If the result is more than expected return, then the projects will ... Read More

The major differences between internal rate of return (IRR) and modified internal rate of return are as follows −Internal rate of return (IRR)Calculates discount rate based on internal factors.NPV = 0.Cash flows are Reinvested at project’s IRR.Provides two solutions.Less accurate.Higher than MIRR.Low precision.Modified internal rate of returnCost of capital is ... Read More

The factors considered by venture capitalist before investing are as follows −Management Team − Investors look for management team that have skills, knowledge, and their record of accomplishment. Commitment towards the goal is the key.Viability of the project − Capital firm will look at product market, end user, competitors and ... Read More

Securitization is the procedure of converting assets into securities. In other words, securitization means all assets of a company are consolidated into securities.An originator, special purpose vehicle (SPV), investment bank, credit rating agency, insurance company, obligator and investor are required in securitization.The process involved in debt securitisation is as follows ... Read More

Cut off point is base point at which investment proposal is accepted. It depends on risk of the investment proposal. If the proposal has high risk then, cut off point is high and if the proposal has low risk then, cut off point is low.Cut off rate is the lower ... Read More

The major differences between cash flow and free cash flow are as follows −SecuritizationIt is related with loans.It is something with loans.Medium or long term.Agencies will look after collections.Originator will take portion of credit risk.FactoringIt is related with book debts.It is something with bills receivables.Short term.Factor will look after collections.Factor ... Read More

The major differences between cash flow and free cash flow are as follows −Cash flowFinds operating cash inflow and activities of finance and investments of the business.Net cash inflows are calculated.Liquidity of company is determined.It has broad scope.Operating, investing and finance cash flows are used in calculating cash flows.It gets ... Read More

SolutionThe solution is as follows −Initial investment = Rs. 25000000/- Disposed value by analyst = Rs.500000/- Book value = Rs.375000/- Tax rate = 25%Tax rate for disposal => (500000 – 375000) * 25%                    => 125000 * 25%                    => Rs.31250/-After deducting taxes => 500000 – 31250                    => Rs.468750/-Terminal cash flows = after deducting taxes + working capital recovered                    => 468750 + 500000                    => Rs.968750/-

SolutionThe solution is given below −Total sales (in billion tons) – current = 16 Total sales (in billion tons) – proposed = 16 + 7 => 23Incremental cash flowsSalesCurrentDomestic sales => 8 * 80 => 640 Export sales => 8 * 120 => 960 Total current sales = 640 + ... Read More

SolutionThe solution is mentioned below −Fixed capital = $ 2000 Working capital = $ 200 Salvage value = $ 1600 Book value = $ 1200 Tax rate = 28%Initial cash flows = FC+WC-S + (S-B) * T                    = 2000 + 200 ... Read More