Purchase Solution

Cost of Capital

Not what you're looking for?

Ask Custom Question

When would a firm use different costs of capital for different divisions with the firm? If the firm was to try to determine cost of capital for different divisions, what problems could occur? What techniques could you use to estimate each divisions cost of capital?

Purchase this Solution
Solution Summary

The solution explains why a firm would use different costs of capital for different divisions.

Solution Preview

The cost of capital that we calculate is for a firm as a whole and is the average cost of capital. If the risk profile of the different divisions is different from the average risk profile of the firm, then we need to use different costs of capital for different divisions.

The ...

Purchase this Solution
Free BrainMass Quizzes
Employee Orientation

Test your knowledge of employee orientation with this fun and informative quiz. This quiz is meant for beginner and advanced students as well as professionals already working in the HR field.

Income Streams

In our ever changing world, developing secondary income streams is becoming more important. This quiz provides a brief overview of income sources.

SWOT

This quiz will test your understanding of the SWOT analysis, including terms, concepts, uses, advantages, and process.

Motivation

This tests some key elements of major motivation theories.

Managing the Older Worker

This quiz will let you know some of the basics of dealing with older workers. This is increasingly important for managers and human resource workers as many countries are facing an increase in older people in the workforce

View More Free Quizzes
Related BrainMass Solutions

  • Explain the Companies Cost of Capital and How it is Calculated

    WACC (Weighted average cost of capital), on the other hand, is the cost of all the capital. It is the total cost of capital as opposed to marginal cost of capital.

  • Calculation of cost of capital, marginal cost, WACC

    279026 Explain calculation of cost of capital, marginal cost, WACC. Impact of market risk.

  • Starbucks WACC for the attached data for years 2009, 2010.

    Marginal cost of capital takes only new funds raised while calculating the cost of capital. Cost of raising additional funds is estimated and it is multiplied with the proportional cost of capital.

  • Company's Cost of Capital

    How is the cost of capital derived?

  • Solving for unknowns

    turnover: 3 Rate on return on invested capital: 15% Cost of capital: ____% Economic profit: $320,000 Economic profit = Income - Cost of capital X invested capital 320,000 = 2,400,000 - Cost of capital X 16,000,000 Cost of capital = 13%

  • Determining required rate of return in capital budgeting

    Cost of capital (WACC)= (Cost of Equity x Proportion of equity from capital)+ (Cost of debt x Proportion of debt from capital)+ (Cost of Preference share x Proportion of preference share from capital).

  • WACC

    Cost of capital (WACC)= (Cost of Equity x Proportion of equity from capital)+ (Cost of debt x Proportion of debt from capital)+ (Cost of Preference share x Proportion of preference share from capital).

  • Marginal cost of capital & weighted average cost of capital

    Cost of capital (WACC)= (Cost of Equity x Proportion of equity from capital)+ (Cost of debt x Proportion of debt from capital)+ (Cost of Preference share x Proportion of preference share from capital).

  • cost of capital,its components

    The answer contains the reason for using opportunity cost as the cost of capital, components of cost of capital, rationale behind measuring cost of capital on after tax basis.

  • Tax laws and cost of capital

    115000 Cost of Capital How do tax laws affect the cost of capital? How would a change in a company's debt rating impact the cost of capital? How do tax laws affect the cost of capital? The cost of capital is the after tax cost of capital.

View More Related Solutions