The Cost of Capital Chapter 14
The Cost of Capital Chapter 14
The Cost of Capital Chapter 14
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Learning Objectives1. Understand the concepts underlying the firm’soverall cost <strong>of</strong> capital and its calculation.2. Evaluate firm’s capital structure, and determinethe relative importance (weight) <strong>of</strong> each source<strong>of</strong> financing.3. Calculate the after-tax cost <strong>of</strong> debt, preferredstock, and common equity.4. Calculate firm’s weighted average cost <strong>of</strong> capital5. Understand: a)Pros and cons <strong>of</strong> using multiple,risk-adjusted discount rates; b)divisional cost <strong>of</strong>capital as alternative for firms with divisions.6. Adjust NPV for the costs <strong>of</strong> issuing new securitieswhen analyzing new investment opportunities.Copyright © 2011 Pearson Prentice Hall. All rights reserved.<strong>14</strong>-3
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