Company cost of capital

• [DOC File]THEORY - CPA Diary

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  Company X is interested in calculating it weighted-average cost of capital. Company X has a current financial structure that is composed of 50% debt, 40% common stock, and 10% preferred stock. Ignore the effects of cost of retained earnings. The beta of Company X stock is 0.7, and the current risk-free rate of return is 4%.

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• [DOC File]Chapter 21 Capital Structure

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  (b) A project-specific cost of capital, based on a weighting of this cost of equity and the cost of the company’s debt capital. 7.3.5 Example 3 A company’s debt : equity ratio, by market values, is 2 : 5. The corporate debt, which is assumed to be risk-free, yields 11% before tax. The beta value of the company’s equity is currently 1.1.

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• [DOC File]The steps are:

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  In that sense, estimating the cost of capital for a project is conceptually very similar to estimating the cost of capital for a company that is not publicly traded (see Section II above). The financing weights used in Section II for a privately held company were the target financing proportions for the company (see Step 2 on page 9).

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• [DOC File]Chapter 11

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  (c) Compare each project's IRR to the company's existing 13% cost of capital. By this test the company should accept C and D since the IRRs of those projects exceeds 13%. (d) Now compare each project's IRR to its own risk-adjusted cost of capital: A: 12% IRR > 11.23% required return accept. B: 10% IRR < 12.50% required return reject

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• [DOCX File]Valuation: Measuring and Managing the Value of Companies

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  Company A is projected to earn $160 in EBITA, grow at 2 percent per year, and generate ROICs equal to 15 percent. Company C is projected to earn $120 in EBITA, grow at 5 percent per year, and generate ROICs equal to 12 percent. Both companies have an operating tax rate of 25 percent and a cost of capital of 10 percent.

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• [DOC File]MERGERS AND THE COST OF CAPITAL

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  The transaction costs (legal fees, accounting fees, management time, etc.) of raising capital are lower per dollar raised as the amount raised increases. There are economies of scale in raising funds. Thus, it is cheaper for one large company to borrow $200 million than for two smaller companies each to borrow $100 million.

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• [DOC File]Chapter 13 The Cost of Capital

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  5.6 WACC (a) Weighted average cost of capital is the average cost of the company’s finance (equity, debentures, bank loans) weighted according to the proportion each element bears to the total pool of capital. (b) A general formula for the WACC is as follows. Where ke = the cost of equity. kd = the cost of debt. Ve = the . market value

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• [DOC File]Part II: The Cost of Capital - exinfm

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  WEIGHTED AVERAGE COST OF CAPITAL (WACC) The firm’s WACC is the cost of Capital for the firm’s mixture of debt and stock in their capital structure. WACC = wd (cost of debt) + ws (cost of stock/RE) + wp (cost of pf. stock) So now we need to calculate these to find the WACC! wd = weight of debt (i.e. fraction of debt in the firm’s capital ...

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• [DOC File]COST OF CAPITAL - Babson College

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  Thus, the after-tax cost of interest is (1-Tc)* rdebt. So, for example, if the debt rate is 10% and the corporate tax rate is 34%, the after-tax cost of interest is 10%*(1-.34) = 6.6%. Therefore, the weighted average cost of capital should take into account the fact that interest is tax-deductible while dividends are not.

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• [DOC File]Opportunity Cost of Capital

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  The “net present value” rule says to accept the distribution of cash flow {C 1}, with expected value C 1, in exchange for investment C 0 whenever C 1 / (1 + r) > C 0 where the rate r used to discount cash flow is the “opportunity cost of capital” associated with the distribution of cash flow {C 1}.

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• [DOC File]Cost of Capital: Downgrade Mania/There goes the Cheap Money

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  Cost of Capital: Downgrade Mania/There goes the Cheap Money. Why might a company’s cost of debt be increased? How is cost of capital stated-- as a percentage or dollar amount? How might a company’s decisions (e.g., capital budgeting, financing) change from an improvement in its debt rating?

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• [DOC File]CHAPTER 7: Financial Budgeting

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  F 3. Cost of capital is the interest rate that a company expects to pay to finance a particular capital investment project. F 4. The higher the cost of capital, the higher the present value of future cash inflows. F 5. If the IRR on a capital project is positive, its NPV will be positive. T 6.

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• CAPITAL COST ESTIMATE Massachusetts Department of Public ...

  Estimates Total Capital Expenditure (Line 4 + Line 16 + Line 20) a Examples Other Non-Depreciable Land Development Costs: commissions to agents for purchase of land, attorney fees related to land, demolition of old buildings, clearing and grading, streets, removal of ledge, off-site sewer and water lines, public utility charges necessary to ...

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