Market vs. Book Value WACC
Weighted Average Cost of Capital (WACC) is defined as the weighted average of the cost of each component of capital (equity, debt, preference shares,… Read Article
Cost of Capital
Evaluating New Projects with Weighted Average Cost of Capital (WACC)
The weighted average cost of capital is a weighted average of the cost of equity, debt, and preference shares. And the weights are the percentage… Read Article
Capital Structure Theory – Modigliani and Miller (MM) Approach
The Modigliani and Miller approach to capital theory, devised in the 1950s, advocates the capital structure irrelevancy theory. This suggests that the valuation of… Read Article
Capital Structure Theory – Traditional Approach
The traditional approach to capital structure suggests an optimal debt to equity ratio where the overall cost of capital is the minimum and the… Read Article
Capital Structure Theory – Net Operating Income Approach
Net Operating Income Approach to capital structure believes that the value of a firm is not affected by the change of debt component in… Read Article
Capital Structure Theory – Net Income Approach
The Net Income Approach suggests that the value of the firm can be increased by decreasing the overall cost of capital (WACC) through a… Read Article
Cost of Preference Share Capital
The cost of preference share capital is the dividend committed and paid by the company. This cost is not relevant for project evaluation because… Read Article
Models for Calculating Cost of Equity
The cost of equity can be defined as the required rate of return an investor would expect against supplying capital. The Expected rate of return… Read Article
Cost of Debt Capital for Evaluating New Projects – Yield to Maturity
The cost of debt is the interest cost that a firm would have to pay for borrowed capital. The interest cost at which the… Read Article
Weighted Average Cost of Capital (WACC)
Weighted Average cost of capital (WACC) is the minimum rate of return required to create value for the firm. Investors of equity, debt, preference… Read Article
Hurdle Rate
What is Hurdle Rate?Hurdle rate, the opportunity cost of capital, and discounting rate are all same. It is that rate of return that can… Read Article