Lecture 32 - Business Finance (ACC501) Lesson 32 Review of...

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165 Business Finance (ACC501) Lesson 32 Review of the Previous Lecture Pro Forma Financial Statements Tax Shield Approach A Closer Look on Net Working Capital Depreciation Capital Investment Decisions Topics under Discussion Returns Income Earned Capital Gains Percentage Returns Variability of Returns Returns One of the responsibilities of the financial manager is to assess the value of the proposed investment. In doing this, it is important that we first look at what financial investments have to offer. At a minimum, the return we require from a proposed non-financial investment must be at least as large as what we can get from buying financial assets of similar risk. Lessons from market history There is a reward for bearing risk The greater the potential reward, the greater the risk. If you buy an asset of any sort, your gain (or loss) from that investment is called your return on investment. This return, usually termed as dollar returns, has normally two components: Income earned (Dividend) Capital gain Alternatively, dollar returns are the sum of the cash received and the change in dollar value of the asset.
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166 Suppose you bought 100 shares of a corporation one year ago at $25.
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This note was uploaded on 08/04/2011 for the course ACCT 501 taught by Professor Na during the Spring '11 term at Virtual University of Pakistan.

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Lecture 32 - Business Finance (ACC501) Lesson 32 Review of...

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