Essay --

Ans. Today a typical operation spends and takes in several hundred thousand dollars per year , and income over a million dollars are not uncommon. The irregularity of income and expenses, and the use of intensive technologies have become very uppercase have adequate funding in the key to the succeeder of a business right time.The use of ceiling and credit has modern investors with a series of decisions to make How much to invest? Where to get capital? What confederacy of loveliness and debt to use? How to negotiate rates and terms of the credit? How much financial risk to take ?Making good financial decisions is often the balance between a thriving economy , growing farm business and is constantly wondering how to pay the next bill. The modules in this course of professional submit will address the above decisions , and more. Although the modules are arranged in a logical sequence , can be completed in any prescribe you want.According keeper and ambrosio , Financial Manage ment is the application of the functions of planning and control of the finance function. Financial decisions are decisions concerning the financial matters of a Firm. The financial decisions are grouped into three categories.1. Investment decisions.2. Financing decisions.3. Dividend decisions. Investment decisionsAn investment decision revolves around the capital expenditure assets that produce the best performance of the fraternity over a period of time desired . In other words , the decision is about what to buy for the companionship will get the maximum value.To do this, the company has to find a balance between your short term and long term. In the very short term , a company needs notes to pay your bills, but keeping all your cash means you ... ...ned asWACC= kd(D/D+E) + ke (E/D+E)D= DividendE= EquityKd= cost of debtKe= cost of equityWACC= value of the firmThe WACC for the firm may be calculated as follows% 0f Equity% of DebtCost Of DebtCost Of EquityCost of capital of DebtCost of capital of EquityWACC100%0%5%12%0.00%12.00%12.00%90%10%5%12%0.50%10.80%11.30%80%20%5%12.50%1.00%10.00%11.00%70%30%5.50%13%1.65%9.10%10.75%60%40%6%14%2.40%8.40%10.80%50%50%6.50%16%3.25%8.00%11.25%40%60%7%20%4.20%8.00%12.20%The optimal debt equity mix for the company occurs at a point when the overall cost of capital, ko, is minimum. The above calculations show that the ko is minimum at a point when the debt is 30% of the total capital employed. Therefore, the firm should use 30% debt and 70% equity in its capital structure and its ko would be 10.75%.