Purchase Solution

Recommendations for determining the costs of capital

Not what you're looking for?

Ask Custom Question

What kind of recommendation would you give for determining the costs of capital?

Purchase this Solution
Solution Summary

This solution provides a description of the recommendations one would give regarding the costs of capital.

Solution Preview

A firm's long-term success depends upon the firm's investments earning a sufficient rate of return. This sufficient or minimum rate of return necessary for a firm to succeed is called the cost of capital. The cost of capital can also be viewed as the minimum rate of return required keeping investors satisfied.
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).

The Nature of Agency Cost of Debt

The agency cost of debt is associated with monitoring, enforcing, credibly promising, and constraining decisions, and result from the general situation in which the optimization problem for one constituency ...

Purchase this Solution
Free BrainMass Quizzes
Motivation

This tests some key elements of major motivation theories.

Marketing Management Philosophies Quiz

A test on how well a student understands the basic assumptions of marketers on buyers that will form a basis of their marketing strategies.

Change and Resistance within Organizations

This quiz intended to help students understand change and resistance in organizations

SWOT

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

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

  • Final recommendations for Superior going public

    Pros and Cons of Using High Proposition of Debt relative to Equity: But it can also use debt in its capital structure for this new project as it will provide the company benefits of taxes and also the company gets exempt from the heavy costs of equity

  • Determining Lowest Cost Alternative

    For example, one needs to consider the annual operating costs as well along with the capital cost of the equipment.

  • Decision on replacing a piece of equipment for a new computerized version

    • Include a statement of the problem or topic, a concise analysis of the findings, and a recapitulation of any main conclusions or recommendations.

  • The Economic Value Added

    Recommendations: The company has to work to make it EVA positive. It can do: - Reducing its cost of capital: Long term financing decision is about determining a firm's optimum capital structure.

  • Finances, Financial Planning, Strategic Planning and Financial Statements

    Step 1 The basic difference between fixed costs and variable costs is that variable costs vary with the level of activity or the number of units produced. Fixed costs on the other hand do not change with the number of units produced.

  • Presentation on Capital Budgeting

    Lava Rocks would like to make this product line for at least 5 years (so the evaluation is for 5 years of revenues and costs). You were at a meeting with the researchers and they gave you the results of the research.

  • Wayne Hurt and The Kroger Company

    This added value content should include conclusions and recommendations for the firm going forward (as if you were a consultant for the firm). Adding value means having detailed conclusions and recommendations.

  • Discussion of the Capital Budgeting Process

    During the decision making step of this process, the company will need to take into consideration the how practical the new investment is by determining how long it will take to recover any costs associated with the investment.

  • Calculating Net Present and future Values

    227409 Net Present Value 1.Calculate the NPV for each of the following investments. The opportunity cost of capital is 20% for all four investments.

View More Related Solutions