Search results for: 'Debt cost'
THE COST OF CAPITAL DF2-141-I
This material focuses on determining the rate of return that will satisfy shareholders’ expectations and how to achieve it. It explains how to find the discount rate that represents the cost of the resources that will finance future investments and how to figure out the cost, or the WACC, by weighting the cost of debt and equity as a function of their relative importance in the company’s capital structure. In addition, it covers how to calculate the cost of debt based on the Gordon-Shapiro share pricing model and based on Sharpe’s asset valuation model using real-life examples and historical data. The case stresses that the manager must know how to add value to the investment; shareholders are entrusting the manager with their investment and expecting a higher rate of return than they could get without him. It wraps up by including an FAQ on WACC.Academic Area:Finance
Optimal Capital Structure DF2-161-I-M
This interactive tutorial explains the concept of the optimal financial mix. Through animations interactive graphs and very simple exercises students will understand and apply this concept.
At the end of the tutorial a practical multimedia case is included where students must find the optimal financial mix for maximizing the value of the investment projects.Academic Area:Finance
The Cost of Capital DF2-141-I-M
This multimedia tutorial teaches students how to calculate the weighted average cost of capital (WACC). It also shows interactive graphs where the students can analyze the effects of equity beta asset beta and the financing mix of the company on the WACC and the NPV. These graphs are complemented by several exercises.
At the end of the tutorial a simple practical case about the correct procedure to use for calculating the WACC when a company is going to float on the stock market is included. This section is complemented by links to websites where the financial information needed to complete the exercise can be found (equity betas from different sectors and their financing mix).