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What do we need to calculate cost of capital?

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What calculations do we need to make in order to determine the cost of capital for comparable companies? Why?

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Solution Summary

The expert determines what is required to calculate the cost of capital.

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There are several different calculations that need to be performed in order to determine the cost of capital for comparable companies. The first calculation in determining cost of capital is cost of debt using the following formula:

(Rf + credit risk rate)(1-T), in which T is the corporate tax rate and Rf is the risk free rate

Cost of debt gives an investor an idea of the risk associated with one company as it ...

Solution provided by:
Rachel Kozicki, PhD (IP)
Education
  • BA, Ashford University
  • MBA, Ashford University
  • Post-Master's Certificate, Northcentral University
  • PhD (IP), Northcentral University
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