Quires Related to Accounts

Dear Sir,

Please explain the below points

Cost of Capital
Present Value
Rate of Return

Appreciate your Help.
Replies (3)
Quick Summary
This discussion clarifies fundamental financial concepts including the Cost of Capital, Present Value (PV), and Rate of Return (ROR). It explains that the Cost of Capital is the minimum profit a company needs to generate value, while Present Value represents the current worth of future money. The Rate of Return measures an investment's profit or loss over time as a percentage of its initial cost.

Cost of capital may be considered as finance / interest costs towards borrowed capital
Cost of capital is the minimum rate of return or profit a company must earn before generating value.

Present value (PV) is the current value of a future sum of money or stream of cash flows given a specified rate of return. Present value takes the future value and applies a discount rate or the interest rate that could be earned if invested.

Rate of return (ROR) is the loss or gain of an investment over a certain period, expressed as a percentage of the initial cost of the investment.
Cost of capital is the cost incurred for maintaining the capital . There are two ways of maintaining cost of capital ...Weighted average cost of capital and cut off rate . Cost of debt , cost of equity which are being calculated on the basis of certain assumptions.
PRESENT VALUE OF MONEY IS FV/(1+R)^n
Today you hv invested some amount of money
what will be the value of same amount of money after 5 years.

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