CPA BEC Part 2 Risk, Return, and Cash Management Techniques
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Cost of Debt
The expected interest cost on new debt times one minus the marginal tax rate due to the fact that interest payments are tax deductible
Weighted-Average Cost of Capital (WACC)
The weighted average of the cost of debt and the various equity components of the firm's capital structure.
Dividend Growth Model
Amodel used to estimate the cost of equity.
CAPM (Capital Asset Pricing Model)
A modle used to estimate the required return on a firm's cost of capital.
Reasons to hold cash
Tranasction purposes, precaution purposes, speculative purposes, and compensating balances
Cash available to make expected day-to-day payments of various obligations.
Target Cash Balance
The desired cash balance that the firm believes is necessary to safely conduct business.
Sychronizing Cash Flows
The matching of the timing of cash outflows with the timing of cash inflows.
Cash available to the firm to take advantage of business oppotunities
Cash balances held as a reserve for random or unexpected fluctuations in cash inflows or outflows.
A cash mangement tool that maximizes cash flow by reducing the administrative and transaction fees for currency conversion.
The sum of disbursement float and the collection float.
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