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Essay example - Financial Management.Rolls Royce Company
Finance & Accounting
Pages 15 (3765 words)
Financial Management [Supervisor Name] Financial Management Introduction United Kingdom based, listed on London Stock Exchange the global business Company Rolls Royce works by providing interconnected systems of power to be used on sea, air, and land…
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It has been one of the most reliable, trust-worthy, and reputable companies in the industry it operates. Rolls Royce has chosen for the evaluation requirement of this report. (Rolls Royce 2012). Part 1: Capital Asset Pricing Model (CAPM] The Capital Asset Pricing Model has been developed to generate estimation over the capital assets of an organization. The model assists in evaluating asset’s generation of annual returns, and makes it possible for organizations to calculate the rate of return of an asset by incorporating non-diversifiable risk. The risk is usually a systematic risk or market risk, represented in terms of ? (beta) and the rate of return of asset when no risk is associated to asset. Capital asset pricing model therefore helps organization to maintain their portfolio of assets. There are two general concepts on which the model CAPM is based including the estimation of risk associated and time value of money to be invested (Amenc and Le Sourd 2003). The time value of money provides a way of estimating the value of money invested today for a specific period of time and it thus compensates the investors for holding their funds in any investment for that period. This concept is represented by the risk return that investors can expect and it is denoted as rf rate in the formula. ...
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