What does company''s cost of capital represent

Reference no: EM13206013

300-400 words
Details: You have considered expanding your line of equipment and apparel for high school athletic teams to include soccer teams and gathered information on the increase in sales for your division and the investment needed in new manufacturing equipment without having to hire additional manufacturing personnel. After this, you arrange a meeting with the CFO. During the meeting, Don listened to your proposal, reviewed your information, but questioned your use of a 6% cost of capital. He indicated to you that the head of treasury could raise debt at 7% in today's market. Taking into consideration how a company's cost of capital is calculated and how market rates and the company's perceived market risk impacts a firm's cost of capital, provide your viewpoint on whether 6% is reflective of the company's current cost of capital.

Include the following in your assessment:

What does a company's cost of capital represent, and how is it calculated? Explain in detail.
How do market rates and the company's perceived market risk influence its cost of capital, and how does the company's debt-to-equity mix impact this cost of capital?
What is market risk, and how is it measured?
Don mentioned using standard deviation and the coefficient of variation to measure risk. What does that mean

Reference no: EM13206013

Questions Cloud

Description of the procedure or begin a dialogue : You are a physician’s assistant working next to a cosmetic surgeon during an operation. Begin a description of the procedure or begin a dialogue that might take place in this setting.

New ideas regarding software design-carol : With a couple of new ideas regarding software design, Carol and Ray start a partnership that, with business success, becomes Pacific Applications Company.

Class is for fundamentals of interpersonal communication : Define and interpret this concept and explain under what conditions and in what relationships showing grace is appropriate and inappropriate.

Favorite films-fictitious or biographical : Think about a character from one of your favorite films, fictitious or biographical.

What does company''s cost of capital represent : You have considered expanding your line of equipment and apparel for high school athletic teams to include soccer teams and gathered information on the increase in sales for your division and the investment needed in new manufacturing equipment witho..

The accrual-basis or the cash-basis : which method of accounting would is best use for your own business: the "accrual-basis" or the "cash-basis"? Which one do you prefer and why?

Discussed by students of both higher and lower levels : Think of a subject which can be discussed by students of both higher and lower levels and which can be interesting to many people. How would you organise the discussion? How would you group the students?

Local area network with a firewall : You have been hired to set up a local area network with a firewall for a Windows® network at a medium-sized company, Taylor & Sons Financial Consulting. The network will have 100 users and 10 applications used extensively by 80 of the employees.

The world''s musics can impact cultures so differently : Why do you think that the world's musics can impact cultures so differently? Listen to the examples of traditional musical sounds from different cultures and try to identify a common similarity.

User Account

All Pages