Rate Of Return For Stocks And Bonds

Rate of Return for Stocks and BondsNameCourseTutor’s NameDateRate of Return for Stocks and BondsCompanies make financial decisions based on their impact on the financial position of the company. Financial decisions involve both investing decisions and firms financing decision. With investing decisions a firm will choose those decisions that will maximise the wealth of the firm and with financing decisions a firm will choose options that have the lowest cost of capital (Brigham & Ehrhardt, 2014). There are several steps involved in making financial decisions. The first is identification of opportunity and evaluation of suitability. This step involves gathering all the relevant information for decision making. The second consideration is the impact of the decision on the firm (Brigham & Ehrhardt, 2014). Typical impact of capital decisions are on the firms risk profile, capital structure and income. The tools used for financial decision-making include stock valuation, total return evaluation, capital asset pricing, weighted average cost of capital and floatation costs.Stock ValuationA stock with an initial price of $100 per share that has paid a dividend of $2.00 per share during the year,