Weighted average cost of capital , Financial Management

I need report on Weighted Average Cost of Capital. Do you provide help in topic Weighted Average Cost of Capital? I need expert's assistance to solve my college assignment. Please suggest if it works for me.

Posted Date: 2/14/2013 12:36:38 AM | Location : United States

Definition of ''Weighted Average Cost of Capital - WACC''

A calculation of a firm''s cost of capital where each category of capital is proportionately weighted. All capital sources - common stock, preferred stock, bonds and another long-term debt - are involved in a WACC calculation. All else equal, the ''Weighted Average Cost Of Capital'' that is abbreviated as WACC of a firm increases as the beta and rate of return on equity increases, as an increase in WACC notes a decrease in valuation and a higher risk.

The WACC equation is the cost of each capital component multiplied by its proportional weight and then summing:

WACC = (E/V * Re) + (D/V * Rd) * (1-Tc)

Re stands for cost of equity
Rd stands for cost of debt
E stands for market value of the firm''s equity
D stands for market value of the firm''s debt
V stands for E + D
E/V stands for percentage of financing that is equity
D/V stands for percentage of financing that is debt
Tc stands for corporate tax rate

Businesses frequently discount cash flows at WACC to determine the Net Present Value (NPV) of a project, using the formula:

NPV = Present Value (PV) of the Cash Flows discounted at WACC.

Posted by isbell | Posted Date: 2/14/2013 12:40:11 AM

Related Discussions:- Weighted average cost of capital , Assignment Help, Ask Question on Weighted average cost of capital , Get Answer, Expert's Help, Weighted average cost of capital Discussions

Write discussion on Weighted average cost of capital
Your posts are moderated
Related Questions
Q. Explain the Procedure to Find Out IRR? Procedure to Find Out IRR:- Step I : Compute the fake payback period   Fake Payback Period = Initial Cash Outflows / A

Q. What do you mean by Gross working capital? Gross working capital: - Gross working capital demotes to firms investment in current assets. Current assets are the assets which

discuss the applicabilty of the operating cycle in a vegetable growing business

Corporates generally raise funds from the Inter Corporate Deposit (ICD) markets. These instruments generally carry interest rates higher than the other short-term

Q. What is the significance of Working Capital? Meaning of Working Capital: - Working capital management is an significant aspect of financial management. In business money is

The production department in any firm is concerned with provision of production facilities, production cycle, skilled and unskilled labor, storage of finished goods, capacity utili

You are considering an investment in a 40-year security. The security will pay $25 a year at the end of each of the first 3 years. The security will then pay $30 a year at the end

Describe the general pattern of cash flows from a bond with a positive coupon rate. Cash flows from a bond along with a positive coupon rate contain periodic interest payments an

This case has been framed in order to test the skills in evaluating a credit request and reaching a correct decision. Perluence International is large manufacturer of petroleum and

In an integrated world financial market, a financial crisis in a country can be rapidly transmitted to other countries, causing a global crisis. What kind of measures would you pro