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Unformatted text preview: Which budgeting criteria to use Chapter 11. Cost of Capital 1. Concept and definition of cost of capital 2. Determining cost of capital a. Cost of debt: (Using PowerPoint slide) b. Cost of preferred stocks c. Cost of common stocks: ii. Growth model iii. CAPM model 4. Weighted average cost of capital a. How to calculate b. How WACC change when capital structure change c. How to use WACC to evaluate new investment-Cost of capital can serve as the discount rate in evaluating new investment when the projects offer the same risk as the firm as a whole.If risk differs, it is better to calculate a different cost of capital for each division. Problem solving 1. Pricing stocks 2. Growth rate 3. Required rate of return for stocks 4. Capital budgeting problem. Calculating Payback, NPV, PI 5. Cost of debt and stock 6. Calculating WACC...
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- Spring '10