Computing cost of capital

    • [DOC File]THEORY - CPA Diary

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      Solution: All of the needed data were provided above. We begin by computing the equity cost of capital using equation [2]. = + [(] = 4% + 1.4 [8%] = 15.2% [3] By definition, the value of the firm, , equals the sum of the value of all the firm’s securities.


    • [DOC File]Chapter 7: Net Present Value and Capital Budgeting

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      "Computing the Cost of Capital for U.S. and Japanese Companies," in William G. Ouchi, The . M-form Society, Reading, MS: Addison-Wesley, 1984, pp. 275-281. "Theory Z, Institutional Economics, and the Theory of Strategy," in Paul Kleindorfer (ed.), Management of Productivity and Technology in Manufacturing.


    • Cost of Capital Formula | Step by Step Calculation Examples

      In computing the cost of capital, the cost of debt capital is determined by . a. Annual interest payment divided by the proceeds from debt issuance. b. Interest rate times (1 – the firm’s tax rate) c. Annual interest payment divided by the book value of the debt. d. The capital …


    • [DOC File]Chapter 14—Capital Budgeting - CPA Diary

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      Step 1: Computing the Cost-of-Service 6. The Cost-of-Service Formula 6. Test Period 7. Rate Base 8. Gross Plant 9. Allowance For Funds Used During Construction (AFUDC) 9. Accumulated Reserve for Depreciation 10. Management Fee 10. Accumulated Deferred Income Taxes (ADIT) 11. Working Capital 12. Cash working capital 12. Materials and Supplies ...


    • [DOC File]Chapter 7: Net Present Value and Capital Budgeting

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      Since there are no capital gains taxes, the PV is just that cash flow, discounted back three periods. PV(Resale) = (11*500)/(1.14)3 = $3,712. NPV = -$55,000 - $63,845 + $3,712 = -$115,133. In order to calculate the equivalent annual cost, set the NPV of the word processor equal to an annuity with the same economic life and discount rate.


    • [DOC File]Computers and Productivity Growth:

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      Cost of goods sold and operating expenses related to the project are predicted to be 25 percent of sales. After four years the machine can be sold for $150,000. Royal Dutch also needs to add net working capital of $100,000 immediately. The additional net working capital will be recovered in full at the end of the project’s life.


    • _JAY B. BARNEY

      The firm’s tax rate is 34 percent. What weight should be assigned to the debt when computing the weighted average cost of capital? a. 26.47 percent b. 28.62 percent c. 31.39 percent d. 34.62 percent _____ 9. Your firm has a cost of equity of 14 percent and a pre-tax cost of debt of 9 percent. The firm maintains a


    • [DOC File]The steps are:

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      cost of capital for other corporations with similar investments. d. mix of capital components for all capital acquired in the most recent fiscal year. ANS: B DIF: Easy OBJ: 14-2. 30. Debt in the capital structure could be treated as if it were common equity in computing the weighted average cost of capital if the debt were ... In computing the ...


    • [DOC File]Chapter 01 Quiz A

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      Chapter 1 2. Chapter 2 4. Chapter 3 6. Chapter 4 8. Chapter 5 10. Chapter 6 12. Chapter 7 14. Chapter 8 16. Chapter 9 18. Chapter 1. Question Number Answer Level 1 Head Reference for Answer Difficulty


    • [DOC File]Cost-of-Service Rates

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      The cost of capital is typically computed using the Jorgensonian formula where c is a constant that is a function of taxes and other common factors, r is the required rate of return on capital, is the depreciation rate and is the proportional change in the price of capital.


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