CHAPTER 11: THE COST OF CAPITAL LEARNING GOALS: 1. Understand the key assumptions‚ the basic concept and the specific sources of capital associated with the cost of capital. 2. Determine the cost of long-term debt and the cost of preferred stock. 3. Calculate the cost of common stock equity and convert it into the cost of retained earnings and the cost of new issues of common stock. 4. Calculate the weighted average cost of capital (WACC) and discuss alternative weighing schemes
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Introduction Capital structure (CS) is one of the most important aspects of the Financial Management of any organization. It aims is to identify and implement the best capital structure proportion possible that suits the organizations needs and objectives. An optimal Capital structure boosts the prosperity of the company in the long run and reduces the risk. CS is a mixture of a company ’s current and non current debt‚ common and preferred equity. It ’s the way a company finances its functions
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EXECUTIVE SUMMARY. Venture capital is the capital invested in a business where the chances of success are uncertain. It is the term to describe the financing of startup and early stage businesses as well as businesses in ‘’turn around’’ situations. Venture capital investments generally investments generally are higher risk investments but offer the potential for above-average returns. A venture capitalist (VC) is a person who makes such investments. The initial‚ start-up money is referred
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Capital Structure 7 July 2013 Introduction The capital structure for a company can be very important for the success of the company. Many aspects of the business must be evaluated in order to determine the appropriate capital structure. Throughout this paper‚ three companies will be evaluated. The three companies being evaluated are eBay (NasdaqGS: EBAY)‚ The Clorox Company (NYSE: CLX)‚ and Alaska Air Group Inc. (NYSE: ALK). Company Overview eBay is a very popular company
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Cost of Capital Definition: cost of capital is the rate of return that a company must earn on its project investments to maintain its market value and attract funds. The cost of capital to a company is the minimum rate of return that is must earn on its investments in order to satisfy the various categories of investors‚ who have made investments in the form of shares ‚ debentures and loans. The cost of capital in operational terms refers to the discount rate that would be used in determining the
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Capital markets:Meaning: Capital markets are markets where people‚ companies‚ and governments withmore funds than they need (because they save some of their income) transfer those funds to people‚ companies‚ or governments who have a shortage of funds(because they spend more than their income). Stock and bond markets are twomajor capital markets. Capital markets promote economic efficiency bychannelling money from those who do not have an immediate productive use for it to those who do.Capital markets
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How venture capital funding works It is popularly believed that venture capitalists fund only established players and proven products. There is a lot of cynicism amongst many about all the hype that private equity and venture capital is getting in India of late. However‚ the truth is that‚ in recent times in India‚ the VCs have actually provided capital to relatively new‚ start-up companies that have a reasonable‚ though not certain‚ prospects to develop into highly profitable ventures. Travelguru
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Financial Management Unit – 4 Capital Structure Capital Structure • It refers to the kinds of securities and the proportionate amounts that make up capitalization. • A decision about the proportion among the three types of securities viz.‚ Equity shares‚ Pref. Shares and Debentures refers to the Capital Structure of an enterprise. What is “Capital Structure”? • Definition The capital structure of a firm is the mix of different securities issued by the firm to finance its operations
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The Capital Structure of Chinese Companies 1. Introduction Capital structure is considered as a way to determine how a corporation financing its assets by issuing debt or equity. If the firm is entirely financed by the common equity‚ then it is so called an unlevered firmed‚ and its whole cash flow belong to its stockholders. If the firm financed both debt and equity‚ then it is so called a levered firm‚ and its cash flow will first goes to debt holders and then to stockholders. According to Brealey
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have a family of his own to care and provide for. Capital punishment exists because some believe it deters crime. If criminals know their punishment will be death‚ they will not commit murder. Some believe a death for a death is fair. They believe it gives some closure and peace because the murderer is rid of forever. And that though it might be expensive‚ it
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