CP

Adjusting the Cost of Capital for Risk 243 Thus, investors in Huron’s stock would have a required return of: Even though the inv ...

244 CHAPTER 6 The Cost of Capital hold for companies that use debt financing. When debt financing is used, the divi- sion’s cost ...

Estimating the Cost of Capital for Individual Projects 245 Accounting betas for a totally new project can be calculated only aft ...

246 CHAPTER 6 The Cost of Capital The first step is to determine the divisional cost of capital, and then to group divi- sional ...

Adjusting the Cost of Capital for Flotation Costs 247 after-tax cost of debt adjusted for flotation. With a financial calculator ...

248 CHAPTER 6 The Cost of Capital incorporate flotation costs? In the example above, application of the DCF methodol- ogy gives ...

Four Mistakes to Avoid 249 1.Privately owned firms. Our discussion of the cost of equity was related primar- ily to publicly own ...

250 CHAPTER 6 The Cost of Capital to earn 10 percent if you buy stock today and 4 percent if you buy bonds. Therefore, thisimpli ...

Summary 251
The component cost of preferred stock is calculated as the preferred dividend divided by the net issuing price, wh ...

252 CHAPTER 6 The Cost of Capital
Companies generally hire an investment banker to assist them when they is- sue common stock, ...

Problems 253 Suppose a firm estimates its cost of capital for the coming year to be 10 percent. What might be reasonable costs o ...

254 CHAPTER 6 The Cost of Capital The earnings, dividends, and stock price of Carpetto Technologies Inc. are expected to grow at ...

Problems 255 The current liabilities consist entirely of notes payable to banks, and the interest rate on this debt is 10 percen ...

256 CHAPTER 6 The Cost of Capital Kaufman & Company acknowledges that an increase in the expected inflation rate could lead ...

Mini Case 257 (2)Equity invested in Project A would have a beta of 0.5 and an expected return of 9.0 percent. (3)Equity invested ...

258 CHAPTER 6 The Cost of Capital i. What factors influence a company’s WACC? j. Should the company use the composite WACC as th ...

...

The Basics of Capital Budgeting: Evaluating Cash Flows 259 7 In 1970, the Adolph Coors Company was a small brewer serving a regi ...

This chapter’s focus is oncapital budgeting,the process o fevaluating specific invest- ment decisions. Here the termcapitalrefer ...

Project Classifications Analyzing capital expenditure proposals is not a costless operation—benefits can be gained, but analysis ...