Why is cost of capital important
[DOC File]Chapter 14—Capital Budgeting - CPA Diary
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Why or why not? If Lex had no debt in its capital structure, what would be its cost of capital? How could Lex use this estimate in their valuation? If Lex operated with essentially no leverage in its capital …
[DOC File]Chapter 12
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One source of confusion is the opportunity cost of capital, i.e., why the rental rate on capital must be considered explicitly by economists. It is important, for example, to distinguish between the purchase price of capital equipment and the opportunity cost …
Explain cost of capital and its importance.
The desirable practice is to employ market weights to compute the firm’s cost of capital. This rationale rests on the fact that the cost of capital measures the cost of issuing securities – …
[DOC File]Principles of Finance
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The cost of capital for MNEs compared to domestic firms. Determining whether a MNEs cost of capital is higher or lower than a domestic counterpart is a function of the marginal cost of capital, the relative after-tax cost of debt, the optimal debt ratio and the relative cost …
[DOC File]Part II: The Cost of Capital - exinfm
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Cost of loan capital = Where n = number of times interest is paid per year. 4.2.4 Example 9. Henry has 12% irredeemable debentures in issue with a nominal value of $100. The market price is $95 ex interest. Calculate the cost of capital …
[DOC File]MERGERS AND THE COST OF CAPITAL
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Cost of Capital Understand the concept of weighted average cost of capital (WACC)—that is, the definition, the computation, and the use. Remember that the WACC is simply the average cost …
[DOC File]Chapter 13 The Cost of Capital
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This is a very important, and counterintuitive, point (however, it . will not appear on the Final Exam). ... and was not meant to imply that there can be no cost of capital benefits from …
[DOC File]CHAPTER 7
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29. The weighted average cost of capital that is used to evaluate a specific project should be based on the. a. mix of capital components that was used to finance a project from last year. b. overall capital structure of the corporation. c. cost of capital …
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