
	Where results make sense

Topic: Cost of capital

Related Topics

production, costs, and pricing

low cost carriers

marginal costs

full cost accounting

sunk costs

transaction costs

social costs

Cost push inflation

capital costs

cost of production theory of value

fixed cost

In the News (Tue 10 Nov 09)

Northern Trust

Marvin Harrison

Peter Chernin

Gary Locke

Match Play

Penelope Cruz

Mickey Rourke

AR Rahman

Danny Boyle

Hugh Jackman

	Cost of capital - Wikipedia, the free encyclopedia
		The cost of capital for a firm is a weighted sum of the cost of equity and the cost of debt (see the financing decision).
		Similarly to the cost of debt, the cost of equity is broadly defined as the risk-weighted projected return required by investors, where the return is largely unknown.
		The cost of equity is calculated as the "expected" return on equity during a past or future period (usually a year or annualized) based on interest rate levels and historical average equity market return.
	en.wikipedia.org /wiki/Cost_of_capital (1191 words)

	[Islam-Online- Economy]
		A profit maximizing firm will continue investing until the marginal productivity of capital becomes equal to the opportunity cost of capital; therefore, "cost of capital" in the Islamic system can be represented by the rate of return on alternate opportunities for investment of comparable risk.
		The model implies that a firm's cost of capital (r) is a function of a firm's q ratio and the firm's market value (V), stream of expected future earnings (Y), ratio of retained earnings, and new stock financing.
		For example, we are interested in finding the cost of capital for a firm with future expected earnings for next year (Y) of $1,000,000 and equity value of $10,000,000 (since there is no debt financing, value of the firm is equal to equity value).
	www.islamonline.net /iol-english/qadaya/economy3/economy-4.asp (1073 words)

	Calculating a Cost of Capital Rate
		The capital structure of the firm is determined by identifying the capital instruments used by the railway company to fund its investments and calculating what percentage of the total investment each instrument contributes.
		The cost of equity rate is then adjusted to reflect its gross pre-tax value, by dividing the cost of equity by a figure equal to one minus the corporate income tax rate.
		The cost of common equity is the average of the rate of return estimated by the CAPM and DCF methods, adjusted to reflect its pre-tax value (see Appendix B and C for calculations).
	www.cta-otc.gc.ca /rail-ferro/finance/cost2_e.html (940 words)

	Session 8: Cost of Capital
		The cost of capital is an opportunity cost of finance, because it is the minimum return which an investor requires.
		The cost of debt capital which has already been issued is the rate of interest (the internal rate of return) which equates the current market price with the discounted future cash flow from the security.
		The cost of capital to be applied to project evaluation reflects the marginal cost of new capital.
	cbdd.wsu.edu /kewlcontent/cdoutput/TOM505/page41.htm (1251 words)

	Nat' Academies Press, Time Horizons and Technology Investments (1992)
		The important questions, from the company perspective, revolve around whether the cost of capital is a high-priority concern, ways in which corporate actions increase or decrease the company's cost of capital, and noncost consequences (exposure to takeover, for example) of corporate financial decisions.
		In summary, the cost and availability of capital for all investment, as well as the economic efficiency of marginal investment decisions, need to be viewed through two lenses: (1) corporate financial structure and behavior; and (2) economic conditions that depend, in part, on government tax and fiscal policy.
		Rather, policies that reduce the cost of capital in the United States may be able to remove as much of the difference in relative costs of capital as is possible given the different financial market structures and financing arrangements in different nations.
	www.nap.edu /books/0309046475/html/43.html (6450 words)

	Capital Structure Theory and Cost of Capital
		Optimal capital structure is the mix of debt and equity that minimizes the cost of capital, or equivalently, maximizes the value of the firm.
		Cost of Capital: The cost of capital is a weighted average of the cost of both debt and cost of equity.
		Recall that capital is a pool of both debt and equity, and the cost of capital is weighted average cost of the pool.
	www.ualr.edu /haterry/capital.htm (2940 words)

	Estimating Cost of Capital Using Bottom-up Betas
		The use of a bottom-up beta in computing the cost of equity component of the cost of capital is an exceptional method of capturing all types of risk.
		The cost of debt is measured by the current level of interest rates, the default risk of the company, and the tax advantage associated with debt.
		The estimated cost of capital should be based on the market values of a company’s debt and equity, since a company has to earn more than its market value cost of capital to generate value.
	www.nysscpa.org /cpajournal/2003/0503/dept/d056603.htm (2484 words)

	Cost of Capital Review Notes
		The cost of retaining earnings is an opportunity cost equal to the rate of return the market could make by taking the dividends of this firm and using them to buy stock in another firm of similar risk.
		To find where a break in the marginal cost of capital schedule occurs, we just need to know two pieces of information: the weight of debt and the maximum amount of bonds that can be sold at 7.00%.
		On the same graph, plot the three sections of the marginal cost of capital schedule: 0 - 15 is 13.40%, 15 - 40 is 14.75% and 40 + is 17.46%.
	www.lehigh.edu /~sgb2/finNotesCostCapital.html (1899 words)

	Online Tutorial #8: How Do You Calculate A Company's Cost of Capital?
		The cost of debt capital is equivalent to actual or imputed interest rate on the company's debt, adjusted for the tax-deductibility of interest expenses.
		Gateway also has $73, 000 in "capital leases." A capital lease is a debt-like agreement in which a firm agrees to pay fixed amounts to someone who leases them land or equipment.
		A company's marginal cost of long-term debt may be better estimated by summing the risk-free rate and the "credit spread" that lenders would charge a company with a specific credit rating.
	www.expectationsinvesting.com /tutorial8.shtml (1594 words)

	The Principles Determining the Cost of Capital
		The determination of the cost of capital for a firm can be considered a matter of confronting the firm's demand schedule for investment funds with its supply schedule of investment funds.
		The cost of capital is the discount rate which makes the quantity of funds it needs for investment projects equal to the quantity of funds it has available at that cost of capital.
		The effect of the tax-deductibility of interest is to shift downward (outward) the supply of capital schedule thereby reducing the equilibrium cost of capital.
	www.sjsu.edu /faculty/watkins/costofcapital.htm (380 words)

	DOES THE COST OF CAPITAL DIFFER ACROSS COUNTRIES?
		The cost of capital is the hurdle rate that a project must satisfy for owners of a firm to not suffer a wealth loss if the project is taken.
		Japanese investors would find their cost of capital lower not because their neoclassical cost of capital is lower but because they have lower agency costs of managerial discretion due to differences in the organization of firms and/or investment opportunities.
		In the theory of the agency costs of managerial discretion outlined earlier, these firms are precisely those where the agency costs of managerial discretion are highest.
	www.cob.ohio-state.edu /fin/papers/keynote.htm (6056 words)

	WACC - Weighted Average Cost of Capital
		WACC (Weighted Average Cost of Capital) is an expression of this cost and is used to see if certain intended investments or strategies or projects or purchases are worthwhile to undertake.
		The cost of capital for any investment, whether for an entire company or for a project, is the rate of return capital providers would expect to receive if they would invest their capital elsewhere.
		Normally, the cost of equity finance is higher than the cost debt finance, because the cost of equity involves a risk premium.
	www.valuebasedmanagement.net /methods_wacc.html (394 words)

	[No title]
		Briefly explain why the cost of new equity is higher than the cost of retained earnings, calculate the cost of new equity, and calculate the retained earnings breakpoint--which is the point where new equity would have to be issued.
		Identify some of the factors that affect the overall, composite cost of capital.
		Use the CAPM to directly estimate the cost of capital for specific projects or divisions.
	www.fiu.edu /~keysj/Cost_of_Capital_CH10.doc (261 words)

	eLearning Session
		Financial Policy and Cost of Capital The firm's financial policies -- i.e., the mix of debt and equity used -- will be taken as a given for the present discussion.
		The cost of equity is generally the most difficult figure to obtain, since it is not directly observable.
		Divisional Cost of Capital Just as the required return of each project is a positive function of its risk, the required return of a division (i.e., the divisional cost of capital) is a positive function of the division's risk.
	www.mhhe.com /business/finance/rwj/ess3e/student/olc/chap12els.mhtml (749 words)

	Cost of Capital (Site not responding. Last check: 2007-11-04)
		Annual yearbook provides cost of capital data, including industry betas, cost of equity, and weighted average cost of capital, for more than 300 industries.
		Includes five separate measures of cost of equity and weighted average cost of capital and detailed statistics for sales, profitability, capitalization, beta, multiples, ratios, equity returns, and capital structure.
		Individual industry reports provide cost of capital data, including industry betas, cost of equity, and weighted average cost of capital, for more than 300 industries.
	www.valuationresources.com /EconomicData/CostofCapital.htm (842 words)

	Cost of Capital
		There is really no "cost" in the cost of retained earnings.
		So when you are doing your capital budgeting, to ensure that the shareholders are getting a decent rate of return, you "guess" a cost of retained earnings.
		This is the weighted average cost of capital.
	www.teachmefinance.com /costofcapital.html (444 words)

	About FinanceAdvisor E.V.A. Software: Cost of Capital (Site not responding. Last check: 2007-11-04)
		It's inputs are the cost of each capital component, Debt, Preferred Stock and Equity, and the capital weights specific to the unit.
		The program calculates the Cost of Capital for Business Risk, the cost of equity for a 100% equity financed firm, as well as the Business Risk Premium, which is also referred to as an "unlevered beta".
		Additionally, once the underlying costs have been established, the program is capable of simulating the WACC at various alternative levels of debt.
	www.financeadvisor.com /finadv/about_sidebar_coc_info.shtml (114 words)

	Cost of Capital Calculations - from Valuation Technologies
		Computing the Cost of Capital is important to the management of a firm, to investors in the firm, and therefore to the Investor Relations Officer.
		The Cost of Equity Capital calculation in Section II above assumes that you are not changing your capital structure, merely raising more capital in the current proportions.
		An alternative method to calculate the expected return to a company's stock, hence equity cost of capital, is based upon the Gordon formula for valuing a stream of dividends with a constant growth rate.
	www.valtechs.com /r3.shtml (2274 words)

	The Weighted Average Cost of Capital
		The weighted cost of capital (WACC) and the return on invested capital (ROIC) are the most important elements in company valuation and the basis for most strategy and performance evaluation methods.
		Usually it is calculated assuming both a constant cost of capital and a fixed set of target market value weights (Copeland et al) throughout the time frame of the analysis.
		To be consistent with the free cash flow or economic profit approach, the estimated cost of capital must comprise a weighted average of the marginal cost of all sources of capital that involves cash payment – excluding non-interest bearing liabilities (in simple form):
	www.fenews.com /fen49/best-of-fen/best-fen.htm (521 words)

	Finance Topic: Cost of Capital, Review Questions
		The cost of preferred stock is 9.5 percent.
		IC's tax rate is 43 percent and the cost of equity is 15 percent.
		When a company's weighted average cost of capital (WACC) has reached the stage where raising additional capital will cause the company's WACC to increase, the company has reached its _________________.
	www.swlearning.com /finance/students/capital_cost_rq.htm (611 words)

	The Cost of Capital Punishment (Site not responding. Last check: 2007-11-04)
		The 784 inmates executed (as of June 26th, 2002) since 1976 are only a fraction of the roughly 7,000 death sentences in that time, which sprang from an even larger number of trials.
		This two-year study determined North Carolina's capital cases cost at least an extra $2.16 million per execution, compared to what taxpayers would have spent if defendants were tried without the death penalty and sentenced to life in prison.
		Capital punishment's fairness, accuracy, cruelty, due process, and cost have all been questioned.
	www.fguide.org /Bulletin/cappun.htm (750 words)

	Ohio Companies' Cost of Capital Would Fall (Site not responding. Last check: 2007-11-04)
		By estimating the weighted average cost of capital for a sample of 87 publicly traded firms in Ohio, we found that the President’s plan would have lowered their cost of capital by an average of about 2.7 percent.
		Over time, lowering the cost of capital by ending the double tax on corporate income would lead to higher economic growth and widespread economic benefits.
		For non–dividend-paying firms, as well as those firms with an EDA greater than their cash dividends paid, the cost of equity capital was lowered to reflect a basis adjustment.
	www.heritage.org /Research/Taxes/wm269.cfm (2898 words)

	The cost of capital as a strategic decision making factor \| Publications \| Expertise \| Strategy Consultants (Site not responding. Last check: 2007-11-04)
		And now that returns on capital can be readily compared on an international scale, capital naturally follows the most lucrative investment opportunities around the globe.
		Companies have since felt compelled to clearly identify the risk exposure of their capital earnings and their cost of capital, and to model the results in their risk management systems.
		It outlines current practice in capital cost allocation at German and Swiss companies, explains promising approaches, and identifies those factors that determine the success of the WACC model when it is applied to individual business lines.
	www.rolandberger.com /expertise/en/html/publications/2006-05-03-RB_study_cost_of_capital_200604.html (339 words)

	Amazon.com: Cost of Capital: Estimation and Applications: Books: Shannon P. Pratt (Site not responding. Last check: 2007-11-04)
		The second edition of Cost of Capital: Estimation and Applications combines a state-of-the-art treatise on cost of capital estimation with an accessible introduction for the nonprofessional.
		An authoritative text on cost of capital for both the nonprofessional and the valuation expert.
		Cost of capital is the expected rate of return that the market requires in order to attract funds to a particular investment.
	www.amazon.com /Cost-Capital-Applications-Shannon-Pratt/dp/0471224014 (1315 words)

	Chapter 12— Cost of Capital
		Whether we are the financial officer of a firm, the marketing person or even the human resources manager, we need to understand the cost of capital.
		Determine the overall cost of capital using the capital structure.
		You will find, as you read this chapter, that the required return on investment, the discount rate and the cost of capital are all pretty much the same number.
	www.rosilyn.com /page17.html (426 words)

	WRAL Local Tech Wire: business, technology, biotechnology, and venture capital news from across the southeastern region (Site not responding. Last check: 2007-11-04)
		You already know many of the costs of fundraising all too well: the blur of plane flights and networking events, the endless stream of “dog and pony” presentations to potential investors, the late nights away from your family reading term sheets.
		Higher risk = higher cost of capital, that is the rule to live by.
		Overall, the cost of equity will be at minimum the hurdle rate demanded by a fund’s limited partners plus an additional margin for their own overhead.
	www.localtechwire.com /article.cfm?u=12453 (968 words)

	Cost of Capital Rates
		The Agency determines the appropriate cost of capital rates to be used:
		2) as a costing component in the setting of interswitching rates, a rate-setting function granted the Agency under section 128 of the Canada Transportation Act.
		4) calculation of the weighted average cost of capital rate, which includes an allowance for income tax.
	www.cta-otc.gc.ca /rail-ferro/finance/cost_e.html (193 words)

	Weighted average cost of capital - Wikipedia, the free encyclopedia
		Thus the capital structure of a firm comprises three main components: preferred equity, common equity and debt (typically bonds and notes).
		If part of the capital consists, for example, of preferred stock (with different cost of equity y), then the formula would include an additional term for each additional source of capital.
		However, since the market value of debt tends to be pretty close to the book value (for companies that have not experienced significant changes in credit rating, at least), the book value of debt is usually used in the WACC formula.
	en.wikipedia.org /wiki/Weighted_average_cost_of_capital (930 words)

Try your search on: Qwika (all wikis)