Modified Internal Rate of Return Analysis: In certain cases, the Internal Rate of Return (IRR) exhibits certain problems which are covered with the new concept of Modified Internal Rate of Return (MIRR).
Financial Leverage is related to debt. The extent or degree to which the total capital of the organization is composed of debt is referred to as financial leverage. So a company with 75% debt is highly leveraged.
Capital rationing is the rationing of investments & capital among various opportunities by business organizations. Capital rationing is the practical picture of capital budgeting because the financial resources available to a certain company are limited in real-life situations.
Types Of Shares: The equity papers that represent ownership of the company are referred to as stocks/shares. The holder of stocks/shares of a particular company is regarded as the part-owner of that company. The stock/shares are direct claim securities whose value is associated with some underlying real asset. When a company needs to raise the money it can issue stocks/shares to the general public.
Capital Asset Pricing Model:- Before going into detail of the capital asset pricing model (CAPM), let’s discuss some of the basic concepts of Risk and Return theory that is helpful in understanding CAPM.