Concept of cost of capital

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Reference no: EM133641475

Chapter 10

The concept of cost of capital: its relationship to the IRR of a project

Know how to compute the cost of

Debt

Preferred stock

Old common stock (retained earnings) using DCF model and the risk premium approach

New common stock (and why is this different from the cost of retained earnings)

Factors determining the cost of capital sources

Effect of tax on the individual costs of the various sources of financing.

Be able to compute the WACC of a project and compare it with the IRR. Advantages and limitations of Cost of capital approach.

Reference no: EM133641475

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