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Topic: Weighted average cost of capital

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	Weighted average cost of capital - Wikipedia, the free encyclopedia
		The weighted average cost of capital (WACC) is used in finance to measure a firm's cost of capital.
		The weighted average cost of capital is defined by:
		The cost of debt is the yield to maturity on the publicly traded bonds of the company.
	en.wikipedia.org /wiki/Weighted_average_cost_of_capital (941 words)

	weighted average cost of capital and sequential marginal costing: A clarification, The Engineering Economist, The - ... (Site not responding. Last check: 2007-10-14)
		weighted average cost of capital and sequential marginal costing: A clarification, The
		In this context, the WACC is used as the overall cost of capital in capital budgeting.
		Paulo first argues that the WACC is an average cost which is in conflict with the principle of marginalism applied for the cash flow analysis since only marginal revenues and marginal costs are counted.
	findarticles.com /p/articles/mi_qa3621/is_199401/ai_n8719001 (945 words)

	Session 8: Cost of Capital (Site not responding. Last check: 2007-10-14)
		The cost of capital is an opportunity cost of finance, because it is the minimum return which an investor requires.
		The weighted average cost of capital is the average cost of a company’s different sources of finance.
		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)

	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)

	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.
		WACC is the discount rate (time value of money) used to convert expected future cash flow into present value for all investors.
		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.
	www.fenews.com /fen49/best-of-fen/best-fen.htm (493 words)

	Manual for Discounting Oil and Gas Income
		The WACC is measured by weighting the typical oil company debt and equity costs by the typical oil company debt and equity capital structure percentages, and then adding the weighted costs.
		Debt and equity costs are weighted according to the typical capital structure percentages and added to derive a typical cost of capital.
		Weighting debt and equity costs -- Once capital structure, debt and equity costs are determined, the final step in deriving the WACC is to weight the cost of debt and equity by the proportional share each has in the overall capital structure.
	www.window.state.tx.us /taxinfo/proptax/ogman (3665 words)

	WACC (Weighted Average Cost of Capital) Definition
		The weighted average cost of capital is the cost associated with a firm's capital structure.
		There is a cost of using this capital (money isn't free) so they try to earn returns in excess of this cost.
		The cost is referred to as the weighted average cost of capital (WACC).
	www.teenanalyst.com /glossary/w/wacc.html (144 words)

	Section II
		Weighted average cost of capital calculations should be based on the after-tax costs of all the individual capital components.
		The weighted average cost of capital for a given capital budget level is a weighted average of the marginal cost of each relevant component which makes up the firm’s target capital structure.
		The weighted average cost of capital is calculated on a before-tax basis.
	www.bilkent.edu.tr /~zonder/practice3.htm (1129 words)

	Calculating a firm's cost of capital: three different methods of determining the weighted average cost of capital for ...
		The idea of the "cost of capital" is fundamental to what managerial finance and accounting professionals do, directly or indirectly, as part of their participation on cross-functional decision teams.
		Conceptually, a firm's cost of capital is an investor's opportunity cost of investing his or her capital in that firm.
		An estimate of the firm's WACC is an attempt to quantify the average return expected by all investors in the firm: creditors of short-term and long-term interest-bearing debt, preferred stockholders, and common stockholders.
	www.findarticles.com /p/articles/mi_m0OOL/is_3_5/ai_n6272119 (980 words)

	WACC
		WACC (Weighted Average Cost of Capital) is an expression of this cost.
		The costs of capital for any investment, whether for an entire company or for a project, is the rate of return which capital providers would want to receive if they would invest their capital elsewhere.
		Normally, the cost of equity capital is higher than the cost debt finance, because equity involve a risk premium.
	www.12manage.com /methods_wacc.html (361 words)

	Cost of capital - Wikipedia, the free encyclopedia
		The cost of debt is relatively simple to calculate, as it is composed of the interest paid (interest rate), including the cost of risk (the risk of default on the debt).
		Similar 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 also known as the discount rate, the rate at which projected earnings will be discounted to give a present value.
	en.wikipedia.org /wiki/Cost_of_capital (1222 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.
		Finally, we weight the cost of each kind of capital by the proportion that each contributes to the entire capital structure.
		Finally, we weight the cost of each kind of capital by the proportion that each kind of capital contributes to the entire enterprise.
	www.expectationsinvesting.com /tutorial8.shtml (1594 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.
		Calculate the firm’s composite, or weighted average, 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)

	Appendix D: The Weighted Average Cost of Capital (WACC) \| Handbook for Optimised Deprival Valuation of System Fixed ...
		D.1 The weighted average cost of capital (WACC) is the minimum acceptable return on investment required by lenders and shareholders.
		It is the weighted average cost of debt and equity funded capital and is the appropriate rate to discount future Free Cash Flows (FCF) to their Present Value (PV).
		It is equivalent to a cost of capital which includes both business risk (arising from the variability of operating cash flows, and financial risk (arising from the variability of residual cash flows after paying interest payments out of uncertain profits).
	www.med.govt.nz /templates/MultipageDocumentPage____12020.aspx (784 words)

	Investors Need A Good WACC
		The cost of capital is the expected return to equity owners (or shareholders) and to debt holders, so WACC tells us the return that both stakeholders - equity owners and lenders - can expect.
		WACC can be used as a hurdle rate against which to assess ROIC performance.
		The WACC is the weighted average of the cost of equity and the cost of debt based on the proportion of debt and equity in the company's capital structure.
	www.investopedia.com /articles/fundamental/03/061103.asp (1628 words)

	Weighted Average Cost of Capital - debt component
		The Weighted Average Cost of Capital is your market based cost of debt and cost of equity weighted by the porportion of your debt to equity.
		Calculate it by multiplying the proportion of your debt times your current interest rate on debt and the proportion of equity times the return expected by the market.
		Your cost of debt is not your historical average.
	www.clintburdett.com /process/10_costs/costs_05_2_cost_of_captial.htm (259 words)

	Cost of Capital (Site not responding. Last check: 2007-10-14)
		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.
		By taking a weighted average, we can see how much interest the company has to pay for every dollar it borrows.
	www.teachmefinance.com /costofcapital.html (444 words)

	[No title] (Site not responding. Last check: 2007-10-14)
		Thus, the overall cost of capital should be a mixture of the returns required to compensate its creditors and stockholders.
		The overall cost of capital is called the weighted average cost of capital.
		Definition: The weighted average cost of capital (WACC) is the expected rate of return on a portfolio of all firm’s securities.
	mason.gmu.edu /~jhsieh/fnan401/lect7.doc (981 words)

	WACC Methodology \| 9. Weighted Average Cost of Capital \| Final Report
		No adjustment is allowed for the cost of raising debt, given that such costs when spread over the term of the debt have a relatively small impact on WACC, and that it is difficult to remove debt issue costs from the businesses' cash flows (to ensure consistency).
		The Commission has used the 75th percentile of the WACC distribution as the basis for judging whether there are likely to be net benefits to acquirers, but in so doing also takes into account the implicit margins that the cost of control provide.
		The effect is to increase the WACC by up to.01 and such an impact is likely to outweigh other possible errors (which could be in either direction) in the upper reaches of the WACC distribution.
	www.med.govt.nz /templates/MultipageDocumentPage____7544.aspx (9569 words)

	Cost of Capital (Site not responding. Last check: 2007-10-14)
		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)

	Ohio Companies' Cost of Capital Would Fall
		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.
		, was estimated by averaging the firms’ interest-expense-to-debt ratio from 1997 to 2001.
		The average marginal corporate tax rate was estimated using, where available, the average (from 1997 to 2001) ratio of the firm’s cash paid in taxes to net operating cash flow.
	www.heritage.org /Research/Taxes/wm269.cfm (2938 words)

	Chapter 10
		When a firm has multiple businesses, it is important to use the cost of capital appropriate to the particular project under consideration, rather than the firm's overall cost of capital, when evaluating a proposed project.
		Or we could use a simple arithmetic average of all of the unleveraged betas which is 0.99 (for this calculation, we add the unleveraged betas for all eight subsidiaries and divide by eight).
		Finally, we could use a capitalization weighted average of 0.93 (for this computation, we have to first get weights for each subsidiary which we do by adding debt value plus equity value for each subsidiary and then divide each addition by the combined debt value plus equity value for all eight subsidiaries).
	www.washburn.edu /sobu/rhull/cf10.html (2956 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)

	Session 3: Value of the Firm and Cost of Capital
		The capital structure decision was first tackled in a rigorous theoretical analysis by the financial economists Franco Modigliani and Merton Miller (M and M or MM) in 1958.
		The Firms ACC is the average cost of the funds normally represented by the WACC.
		The average basis cost of capital is calculated using the company’s balance sheet data.
	cbdd.wsu.edu /kewlcontent/cdoutput/TR505r/page28.htm (1745 words)

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