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)


Where:
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. Working Capital Based on Operating Cycle? The concept of operating cycle, helps determining The time scale over which the current assets are maintained. The operating cycle

lease finance and its types

Dividend cover Dividend cover = Profit available to ordinary shareholders (PAT) / Annual dividend(no. of times) Or =    EPS/Dividend per share Dividend cover shows safety

I need this in the next 24 hours urgently. If you can accept this, you must be meeting the deadline with strictly no delays or full payment refund is needed

1. Discuss and describe in your own words the five Cs of credit analysis. 2. Why is it difficult for an entrepreneur to finance a startup with debt? What are the dangers of cre

Central Bank : The Central Bank is the nation's principal monetary authority responsible for the monetary policy of the country. It regulates money supply and credit, issues cur

Types of financial incentive schemes Performance associated pay (PRP) systems e.g. piecework or sales commission Bonuses e.g. supplementary payments for targets or ai

Before tax cost of debt and after tax cost of debt; Personal finance problem. David Abbot is interested in purchasing a bond issued by Sony. He has obtained the following inform

Source documents of an accounting system: Source documents are those documents that identify the particular transaction that is being recorded.  They act as an internal control

A simple passive strategy involves building a portfolio and holding it through time. The coupons as well as the proceeds of matured bonds are just reinvested in new iss