CHAPTER 13
THE COST OF CAPITAL
FOCUS
The cost of capital was introduced in Chapter 10 as an underpinning for capital budgeting, so the
student is already familiar with the basic concept. Here we focus on the practical intricacies of the
calculation and th
INTERNATIONAL MANAGEMENT (MGT 4478)
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The Cost of Capital
Cost of Capital, Discounts Rates, and the required Rate of Return

We know how to do capital budgeting problems, but what about the discount rate?

We also know that the discount rate will depend on the risk of the project:

Investo
Chapter 012 The Weighted Average Cost of Capital and Company Valuation
True / False Questions
1. Capital structure in essence is a firm's mix of longterm financing.
TRUE
2. The company cost of capital is the expected rate of return that investors demand
Chapter 11
Discussion Questions
111.
Why do we use the overall cost of capital for investment decisions even when
only one source of capital will be used (e.g., debt)?
Though an investment financed by lowcost debt might appear acceptable at first
glance
MFIN 6663 Sobey School of Business Saint Marys University Greg MacKinnon
Weighted Average Cost of Capital The weighted average cost of capital (WACC) of a firm simply refers to how much, on average, it costs the firm to raise money. That is, it is the ave
COST OF CAPITAL
Cost of capital calculations are a very important part of finance. To value a project, it is
important to discount the cash flows using a discount rate that incorporates the debtequity mix of
financing that the project will use. The disco
Cost of Capital
The cost of capital is the minimum rate of return an
investment project must generate in order to pay its financing
costs.
For a levered firm, the financing costs can be represented by
the weighted average cost of capital.
Weighted Average
How to Answer
The 64 Toughest
Interview
Questions
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