Definitions and Symbols Used

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Definitions and Symbols Used

Definitions and Symbols Used

symbols used

In the various theories of capital structure, debt related to long term, and short term debt along with different equities. These are important as these are the main factors for the growth of those companies which depend on funds. Thus, different small terms with proper definitions and symbols used to get perfect analysis along with evaluation on which some particular factors get depend on. Thus, definitions and symbols are very important for the analyser to know the concept deeply.
Our team experts of Definitions and Symbols Used Assignment Help explain everything in a proper way. Some particular symbols like S for total market value equity, B for a total market value of debt, I total interest payments, V for the total market value of the firm where the value of B can be evaluated by the sum of S and B. NI is also important to equity holders, cost of debt, the value of debt, equity, growth rate, market price per share, net operation of the income, interest charges and much more.
S = Total market value of equity shares.
B = Total market value of debt
I = Total interest payments.
V = Total market value of the firm
NI = Net income available to equity shareholders.
V = B+S
Cost of debt ( Kd) = 1/ B
Value of debt (B) = 1/ Ke
Cost of equity capital (Ke) = D1/P + g
Because of assumption no-4 growth rate =O. So, Ke= D/P and since payout ratio = 100% D= earnings or dividends.
Therefore, Kd= E/P
Multiplying both, numerator and denominator by the number of shares, we get :
e
Ke= E×N/P× N             EBIT -1 /S  or  NI
Ke = Net income available to the shareholder/Total market value of equity shares
Overall costs of Capital (Ko)
Ko= W1 Kd + W2 Ke (W1 & W2 are weights.)
( ) ( ) ( ) e
d e d
B S K B/V(Ke ) or {B/B+ S(Kd)}+S(Ke)/B+ S
or
K = 1+NI/V = EBIT/V
so
V = EBIT/Ko