Fin/571 Rate Of Return For Stocks And Bonds

Rate of Return for Stocks and Bonds Name Course Tutors Name Date Rate of Return for Stocks and Bonds Corporate finance decisions are influenced by many financial factors such impact on the financial position of the company, cost of capital and expected returns. Inflation erodes the value of an investment while dividends reduce the capital gains from an investment through distribution. Floatation costs increase the cost of raising funds and may affect a firms financing decision as firms will make decisions that maximise the wealth of the firm. Where a firm raises funds from different sources of finance such as equity and debt, the weighted average cost of capital (WACC) is a better indicator of the cost of finance for the firm (Vernimmen, Quiry, Dallocchio, Le Fur, Salvi, 2014).The technique said financial decisions may include stock valuation, total return, capital asset pricing, weighted average cost of capital and floatation costs calculation. Stock Valuation A stock with an initial price of 100 per share, a dividend of 2.00 per share during the year, and selling at 125 at the end of the year would have the following calculations forpercentage total return, capital gains yield, and dividend yield. Stock valuationInitial price100Dividend paid22Capital