http://code.activestate.com/recipes/tags/financial_management/2011-01-26T14:26:06-08:00ActiveState Code Recipes2011-01-26T14:26:06-08:00Fouad Teniouhttp://code.activestate.com/recipes/users/4155345/http://code.activestate.com/recipes/576708-dvm_versus_capm/

<p style="color: grey"> Python recipe 576708 by <a href="/recipes/users/4155345/">Fouad Teniou</a> (<a href="/recipes/tags/corporate_finance/">corporate_finance</a>, <a href="/recipes/tags/financial_management/">financial_management</a>). Revision 5. </p> <p>Cost of equity could be found using my program DVM_Versus_CAPM by either methods, the DVM ( Dividend Valuation Model ) or the CAPM ( Capital asset pricing model ). However, value of the share (Company value) could also be found using my program, if the cost of equity Ke is known, whether assuming a constant dividend where Po = D/Ke or a constant growth g where Po = Do(1+g)/Ke-g. Though, the growth rate g is estimated in two different ways, by using the extrapolating growth formula, based on the past dividend history or by applying the Gordon’s growth model (g = r x b). Projects undertaken by firms will have different risk profiles, and so is the company return required, since it reflect this risk, thus, the DVM model assumptions conflict, and yet the DVM high sensitivity to these assumptions. Nevertheless, using the CAPM (Ke = Rf + Beta(Rm - Rf), the investors will require different rates of return for different projects depending of the risk of each project. Rf is the risk free rate, ( Rm - Rf) is the average risk premium, and Beta is the systematic risk of investment. Beta of the share could be measured or obtained from the commercial information suppliers such as Datastream, and the more volatile the business the higher is Beta. My program DVM_Versus_CAPM will be of a value to ACCA’s students and also to students of Corporate Finance.</p>

2009-07-27T05:27:06-07:00Fouad Teniouhttp://code.activestate.com/recipes/users/4155345/http://code.activestate.com/recipes/576683-irr_versus_npv-26/

<p style="color: grey"> Python recipe 576683 by <a href="/recipes/users/4155345/">Fouad Teniou</a> (<a href="/recipes/tags/accounting/">accounting</a>, <a href="/recipes/tags/financial_management/">financial_management</a>). Revision 14. </p> <p>The precise rate of IRR( Internal Rate of Return ) is found using my program IRR-Versus-NPV, where I used the linear interpolation . However, companies decide to take or reject a project by comparing the IRR value to the minimum required return. If the IRR is greater than the cost of capital the project should go ahead, otherwise the project should be rejected. The NPV (Net Present Value) could also be computed using my program, where projects are accepted or rejected on the basis of the NPV value, if the NPV is greater than zero the project is accepted , otherwise rejected, a positive NPV demonstrate the project is attractive, thus, it will increase the shareholders’ wealth by this amount. NPV and IRR are both superior Project appraisal techniques, yet the NPV method is a better technique, since it shows an exact amount of increase in shareholders’ wealth, and yet the IRR requires a use of a computer program. My program IRR-Versus-NPV will be of a value to ACCA’s students and also to both undergraduate and postgraduate students of Corporate Finance, Accounting, and Business studies.</p>