2.8 Stud%20Week%2010%20Lect%202%20Cost%20of%20Capital

2.8 Stud%20Week%2010%20Lect%202%20Cost%20of%20Capital -...

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    Capital Structure and  Cost of Capital Week 10 Lecture 2
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    Topics Covered Capital Structure – brief  Cost of Capital Concepts Weighted Average Cost of Capital  (WACC)
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    Capital Structure FINC 201 shows the general idea of capital  structure to aid in understanding the cost of  capital FINC 202 will expand on capital structure FINC 354 will develop capital structure  thoroughly
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    The combination of debt and equity  used to finance a firm Debt Debt Debt Debt Debt Debt Debt Equity Equity Equity Equity Equity Capital Structure Debt
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    The Balance-Sheet Model of the Firm Current Assets Fixed Assets 1 Tangible 2 Intangible Total Value of Assets: Shareholders’ Equity Current Liabilities Long-Term Debt Total Firm Value to Investors:
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    What sources of long-term capital  do firms use? Long-Term Capital Long-Term Debt Preferred Stock Common Stock Retained Earnings New Common Stock
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    The optimal mix of debt, preferred stock,  and common equity with which the firm  plans to finance its investments May change over time Trade-off between ____________ to  achieve goal of __________ the  ________ of the stock Target Capital Structure
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  Cost of Capital Cost of Capital  - The return the firm’s investors  could expect to earn if they invested in assets  with comparable degrees of risk. This is an Opportunity Cost of Capital
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This note was uploaded on 12/23/2009 for the course BCOM FINC 201 taught by Professor Debrak.reed during the Spring '09 term at Canterbury.

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2.8 Stud%20Week%2010%20Lect%202%20Cost%20of%20Capital -...

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