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The weighted arithmetic mean is similar to an ordinary arithmetic mean (the most common type of average), except that instead of each of the data points contributing equally to the final average, some data points contribute more than others.
The rate of return on a portfolio can be calculated indirectly as the weighted average rate of return on the various assets within the portfolio. [3] The weights are proportional to the value of the assets within the portfolio, to take into account what portion of the portfolio each individual return represents in calculating the contribution of that asset to the return on the portfolio.
The weighted average return on assets, or WARA, is the collective rates of return on the various types of tangible and intangible assets of a company.. The presumption of a WARA is that each class of a company's asset base (such as manufacturing equipment, contracts, software, brand names, etc.) carries its own rate of return, each unique to the asset's underlying operational risk as well as ...
The dual use of the word "duration", as both the weighted average time until repayment and as the percentage change in price, often causes confusion. Strictly speaking, Macaulay duration is the name given to the weighted average time until cash flows are received and is measured in years. Modified duration is the name given to the price ...
Weighted average cost of capital equation: WACC= (W d)[(K d)(1-t)]+ (W pf)(K pf)+ (W ce)(K ce) Cost of new equity should be the adjusted cost for any underwriting fees termed flotation costs (F): K e = D 1 /P 0 (1-F) + g; where F = flotation costs, D 1 is dividends, P 0 is price of the stock, and g is the growth rate. There are 3 ways of ...
Since the probabilities must satisfy p 1 + ⋅⋅⋅ + p k = 1, it is natural to interpret E[X] as a weighted average of the x i values, with weights given by their probabilities p i. In the special case that all possible outcomes are equiprobable (that is, p 1 = ⋅⋅⋅ = p k), the weighted average is given by the standard average. In the ...
c = cost of capital, or the weighted average cost of capital (WACC). NOPAT is profits derived from a company's operations after cash taxes but before financing costs and non-cash bookkeeping entries. It is the total pool of profits available to provide a cash return to those who provide capital to the firm.
As another example, a two-year return of 10% converts to an annualized rate of return of 4.88% = ((1+0.1) (12/24) − 1), assuming reinvestment at the end of the first year. In other words, the geometric average return per year is 4.88%. In the cash flow example below, the dollar returns for the four years add up to $265.