The Cost of Capital参考.ppt

Divisional Cost of Capital 9-* * * * * * * * * * * * * * * * * * * * * * * * * * * * ? 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, or duplicated, or posted to a publicly accessible website, in whole or in part. ? 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, or duplicated, or posted to a publicly accessible website, in whole or in part. ? 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, or duplicated, or posted to a publicly accessible website, in whole or in part. The Cost of Capital Sources of Capital Component Costs WACC Adjusting for Flotation Costs Adjusting for Risk Chapter 10 10-* What sources of capital do firms use? 10-* Calculating the Weighted Average Cost of Capital WACC = wdrd(1 – T) + wprp + wcrs The w’s refer to the firm’s capital structure weights. The r’s refer to the cost of each component. 10-* Should our analysis focus on before-tax or after-tax capital costs? Stockholders focus on A-T CFs. Therefore, we should focus on A-T capital costs, i.e. use A-T costs of capital in WACC. Only rd needs adjustment, because interest is tax deductible. 10-* Should our analysis focus on historical (embedded) costs or new (marginal) costs? The cost of capital is used primarily to make decisions that involve raising new capital. So, focus on today’s marginal costs (for WACC). 10-* How are the weights determined? WACC = wdrd(1 – T) + wprp + wcrs 10-* Use accounting numbers or market value (book vs. market weights)? Use actual numbers or target capital structure? Overview of Coleman Technologies Inc. Firm calculating cost of capital for major expansion program. Tax rate = 40%. 15-year, 12% coupon, semiannual payment noncallable bonds sell for $1,153.72. New bonds will be privately placed with no flotation cost. 10%, $100 par value, quarterly dividend, perpetual preferred stock sells for $111.10. Common stock sells for $50. D0 = $4.19 and g = 5%. b = 1.2; rRF = 7%; RPM = 6%. Bond-Y