Aug 18th, 2016
Studypool Tutor
Price: $0 USD

Tutor description

Word Count: 222
Showing Page: 1/10
Cost of debt = Interest PaymentsDebts are the borrowing which company takes tofinance the company therefore they have to payinterest on those borrowing. So the cost of debt isthat interest which company has to pay on theborrowings and normally it is taken after tax as it isthe tax deductible expense.Cost of DebtPVIFInterest rate6x in PVIF formula1-1/1+x^10)/xThe x in PVIFformula is6.01477310.50%Cost of equity = (Rm-Rf)*BetaCost of Equity = Dividend per share/Current Marketvalue of stock + Growth rate of dividends.Cost of equity is defined as the return which stockholdersrequire on their investments. It is the required rate ofreturn for the stockholder but it is cost for the company.Cost of equity can be calculated in two ways. Dividendvaluation model and Capital Asset Pricing models are theways through which cost of equity is calculated.Cost of Equity3+1.39(12-3)15.5%WACC = k.e*equity/Equity + Debt+ k.d (1-t)*Debt/ Equity + DebtWACC stands for weighted average cost of capital andit is the combination of equity and debts structure ofthe company. It is the required rate of return of theinvestor and by the help of this we discounts the futurecash flows and take out NPV of the projectsDebtEquity60000010.50%0.0315140000015.5%0.10857200000014.0%Name: Description:

Review from student

Studypool Student
" <3 it, thanks for saving me time. "
Ask your homework questions. Receive quality answers!

Type your question here (or upload an image)

1825 tutors are online

Brown University

1271 Tutors

California Institute of Technology

2131 Tutors

Carnegie Mellon University

982 Tutors

Columbia University

1256 Tutors

Dartmouth University

2113 Tutors

Emory University

2279 Tutors

Harvard University

599 Tutors

Massachusetts Institute of Technology

2319 Tutors

New York University

1645 Tutors

Notre Dam University

1911 Tutors

Oklahoma University

2122 Tutors

Pennsylvania State University

932 Tutors

Princeton University

1211 Tutors

Stanford University

983 Tutors

University of California

1282 Tutors

Oxford University

123 Tutors

Yale University

2325 Tutors