Aug 18th, 2016
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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:

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