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Investment based on the capital structure of a firm.

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Identify the advantages and disadvantages of an investment based on the capital structure of a firm.

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The expert identifies and advantages and disadvantages of the investments based on the capital structure of a firm.

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INVESTMENT: ADVANTAGES AND DISADVANTAGES ON A CAPITAL STRUCTURE BASIS

Investment may be simply defined as present expenditure with an expectation of future income. Since it is expenditure, it would require an initial cash outlay and possibly, additional periodic cash outlays in the future, depending on its terms and conditions. The amount of expenditure varies with the type and nature of investment.

To compensate for the cash outlays and possible opportunity costs (earnings foregone as a result of an investment decision), an investor expects future income that would be brought in by expected cash inflows (as against cash outflows). The number of years in which the future cash flows are expected would also be dependent on the investment's economic life. The net returns that would be expected in relation to cash outlays would also be too much dependent on the investor's required rate of return. Consequently, this required rate of return may have been based on the investor's cost of capital and the forecasted ...

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  • Master in Business Administration, Saint Mary's University
  • Doctor of Philosophy in Education, University of the Philippines
  • Doctor in Business Adminstration (IP), Polytechnic University of the Philippines
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