ch12 a - Chapter12 CostofCapital 1 BalanceSheet BuyWhat?

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Chapter 12 Cost of Capital 1
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Balance Sheet Assets                                Current Assets                   Fixed Assets                                              The financing decision The investment decision Buy What? Where do I get the money? Current Liabilities Long-term Debt Preferred Stock Common Equity 2
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For Investors ,  the rate of return on a security is a   benefit  of investing. For Financial Managers ,  that same rate of return  is a  cost   of raising funds that are needed to  operate the firm. In other words, the cost of raising funds is the  firm cost of capital . Cost of raising funds = Cost of capital 3 Cost of Capital
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Appropriately estimate a firm  Cost of capital  is important for  a company to make correct decision on its Capital Structure  (mixture between debts and equities) 4 The Financing Decision } Capital Structure Assets Liabilities & Equity Current assets Current Liabilities Long-term Debt Preferred Stock Common Equity 4
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Bonds Preferred Stock Common Stock Each of these offers a  rate of return  to investors. This return is a 
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ch12 a - Chapter12 CostofCapital 1 BalanceSheet BuyWhat?

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