finance, cost of capital

Related BrainMass Solutions

• Weighted average cost of capital

  288957 Finance: Calculating the Weighted Average Cost of Capital Royal Petroleum Co. can buy a piece of equipment that can be financed with debt at a cost of 9% and common equity at a cost of 16%.

• Long term finance strategies

  When putting together the capital budget, one of the most important long term finance strategy is to make sure that capital investments are worth more than they cost.

• Opportunity Costs, Cost of Capital, Interest Compounding Periods

  Opportunity cost of finance - The cost of capital is an opportunity cost of finance, because it is the minimum return which an investor requires. 2.

• WEIGHTED AVERAGE COST OF CAPITAL

  Weighted average cost of capital= Proportion of debt*Cost of debt + Proportion of equity*Cost of equity =.5*6%+.5*18% =0.12 or 12%=Answer The project having return more than Weighted average cost of capital should be accepted.

• Difference between operating and financial leverages

  Normally, the cost of equity finance is higher than the cost debt finance, because the cost of equity involves a risk premium. Calculating this risk premium is one thing that makes calculating WACC complicated.

• Financing a Project Through Debt, Equity and Stock

  The advantages of having the mixture of different kinds of capital i.e. using a combination of debt, equity and stock to finance a project, can be understood by the concept of measuring the cost of capital.

• Finance problem: Weighted average cost of capital.

  The solution would be useful to finance students. Thank you. The problem deals with a veritable aspect of finance: cost of capital.

• Finance problem: Weighted average cost of capital.

  The problem will be useful to finance students. Thank you. The problem deals with estimating the weighted cost of capital for a firm.

• Cost of equity

  22794 Theories of Capital Structure In each of the theories of capital structure, the cost of equity rises as the amount of debt increases. So, why don't financial managers use as little debt as possible to keep the cost of equity down?