Premium Essay



Submitted By alkoholev
Words 1092
Pages 5
The Weighted Average Cost of Capital
Cost of Capital – the cost that a firm must pay for the capital it uses to finance new investments and investment projects.
Capital comes from: 1) Debt 2) Preferred stock 3) Retained earnings 4) Common stock
Cost of Capital to the firm is the equilibrium rate of return demanded by investors in the capital markets for securities in that risk class. So, it is the minimum rate of return required on new investments undertaken by the firm.

The role of cost of capital in capital budgeting:
If IRR on New Investment > Cost of Capital ( Value of firm rises ( Stock Price rises
If IRR on New Investment < Cost of Capital ( Value of firm falls ( Stock Price falls

Why is the Cost of Capital equal to the return investors require?
Because when the investors give the firm their money, they expect to earn a return commensurate with the risk of that project or firm. Therefore, at a minimum the firm must earn at least the Expected Return, E(R), that investors require. So the E(R) from the Capital Asset Pricing Model (CAPM) (and similar models) becomes the minimum rate that the firm must earn to satisfy investors and this rate becomes one component of the relevant discount rate used in capital budgeting decisions.

Computing the Cost of Capital for Each Component
Cost of Equity Capital (Common Stock)
Recall the CAPM [pic]
Where: [pic] is the return on the [pic] stock, [pic] is the return on the Risk Free asset, [pic] is the return on the market, [pic] is the measure of systematic risk. eg. t-bill Rate=7% [pic]

How to calculate [pic]? 1) Book shows formula, but this is just the slope in a 2 variable regression of [pic] on [pic]. Could plot data, draw line, and get slope. 2) Look it up: Value Line, Merrill Lynch, Yahoo, etc.

Similar Documents

Premium Essay

Masters Interview

...Interveiw with a Master's Prepared Nurse Interview with a Master’s Prepared Nurse Interview with a Master’s Prepared Nurse Introduction As a mastered prepared nursing student, gaining insight into the interplay among education, career path, and opportunities by interviewing an already masters prepared nurse, in the field of nursing education, can be used as a guidance into the experiences that may lie ahead in a promising and rewarding career in nursing education. This interview with a mastered prepared registered nurse, helped identify specific competencies that the MSN-prepared nurse gains after completing such a program. The interview was conducted on October 22, 2014 with the Clinical Nurse Educator for Woman and Infant Services, at Banner Gateway Medical Center. She was accommodating for this interview, although she states her days are quite busy, in her clinical role. Questions and Career Overview The Nurse Educator was first asked what her role was as the Clinical Nurse Educator for this medical center. She was quick to state that nurse educators in the Banner Health System not only have education for their specific units, but also have responsibilities to educate system wide. A day in the life of a Nurse Educator sometimes goes globally with her knowledge; to teach beyond his/her assigned unit. She continued to explain that there are a variety of functions that her position encompasses, however, she limited the list to the top three: onboarding/new...

Words: 313 - Pages: 2

Free Essay

Master Track Licence

...MASTER TRACK LICENSE THIS AGREEMENT is made and entered into as of this day of , 20 by and between (hereinafter referred to as "Licensee") and (hereinafter referred to as "Licensor"). It is the desire of Licensee to use that certain master recording (hereinafter referred to as the "Master") embodying the performance of (hereinafter referred to as the "Artist") of the musical composition " " (hereinafter referred to as the "Composition") in episodes of a (hereinafter referred to as the "Program"). 1. In consideration of the mutual covenants set forth herein, Licensor hereby grants to Licensee, its successors in interest, assigns and licensees the non-exclusive, irrevocable right to record, dub and synchronize the Master in whole or in part into and with the Program, advertisements and trailers thereof, and to exhibit distribute, exploit, market and perform each Master embodied within the Program, to be used in connection with audio-visual contrivances such as video cassettes, video tapes, video records and similar compact audio-visual devices whether now known or hereafter developed (hereinafter referred to as "Videograms"). Such rights pursuant to this paragraph l (b), include: (i) the right to utilize such Videograms for any of the purposes, uses and performances hereinabove set forth; (ii) the right to sell, lease, license or otherwise make such Videograms available to the public as a device intended primarily...

Words: 1420 - Pages: 6

Free Essay

Spin Master Toys

...Spin Master Toys Case Study Final Exam IS 8100 Renu Ramnani Q1. What is the history of Spin Master toys? In April 1994, Spin Master business was founded by three university friends, Anton Rabie, Ronen Harary and Ben Varadi, who were graduated from the University of Western Ontario. These three friends decided to find out an opportunity in the corporate world and made Early Bird, and in just six months company sold 1.5 million of them, which was a great hit during that time period. Early Bird was a nylon stocking filled with sawdust and grass seed mounded into head, and after its immersion in water, the grass seed was sprouted which gave a head a crop of grass hair. In 1995, the company launched Spin Master Devil Sticks, which was made up of two hand-held sticks and was used to control the third one. This product was also a great success for the company and later on, the company was named after it, that is Spin Master Toys. By this time, the company covered the major retail segments in North America and also believed that the reason behind their success was avant-garde, grass root marketing savvy and a two tier distribution network. Also, for the following three years, the company produced products for the Canadian market with the use of very low technology and high margin toys. Spin Master never reached to the same success ratio as the Earth Buddy's sales. Later on, Spin Master mainly focused to build relationships with their retailers and investors and create research...

Words: 2156 - Pages: 9

Premium Essay

Paradox in Master and Margarita

...In Master and Margarita, Mikhail Bulgakov utilizes opposing forces to drive the major themes of the novel-- Good versus evil, spiritual life versus material life, and justice versus injustice. These contrasting ideas are dependent upon each other to embody the messages of the novel. Woland, the devil, is the main arbitrator of justice and evil, but also creates the main paradox in the novel. Unlike the devil of traditional Christian teachings, Woland is capable of good and benevolence. This paradox plays an important role in both the story in Moscow and Jerusalem. Woland causes the characters, and the reader, to question life by encouraging awareness of the interdependency of Good and Evil in the proper functioning of life. In the novel, all evil is necessary in order to obtain a greater good. However, we see this end goal lost in the stories of Caesar and Stalin. They no longer have are able to recognize the difference between constructive evil and destructive power. However, evil seems to play as a nameless character in the novel, and in turn, in Stalinist times. Stalin does not directly kill any individuals, and neither does Caeser, but people still live in fear of him. People are surrounded by this terror, and only those who are self-aware and willing to call reality into question are able to create meaning for themselves. Bulgakov uses characters to possess this ability to display how meaning can be attained even when surrounded by terror and repression. People...

Words: 1441 - Pages: 6

Free Essay

Spin Master Toys

...Spin Master Toys (A): Finding a Manufacturer for E-Chargers 1. What is your assessment of the process that Spin Masters has used to get to this point? 2. As Alex Perez, which of the two potential suppliers would you choose? Why? 3. Discuss an implementation plan for your decision.  Summary Spin Master Toys of Toronto, Ontario, a company who had been successful in creating fad items was about to roll out a new line of airplanes that were going to be powered by electricity called E-Chargers. With a delivery date to the retailers of December 7, 1999, they were now trying to decide from which supplier to purchase the design and production of this rollout. They had investigated a number of suppliers and managed to narrowed it down to two, Wah Shing and Wai Lung. They had to make a choice quickly. Analysis Evolution Anton Rabie, Ronnen Harary and Ben Varadi all graduated from The University of Western Ontario. Varadi and Rabie from the Ivey Business School and Harary from political Science. They all chose not to go into the corporate world and pursued their own dreams by creating successful fad items. Some of those items were Grow-Things, Earth Buddy, Radical Reptiles and many more. In 1996 Spin Master rolled out its Air Hogs line of compressed-air-powered planes which they manufactured in China. Before they decided to do it, it took them time to digest the idea, they thought it was too ambitious. After their success with Air Hogs, they rolled...

Words: 1203 - Pages: 5

Free Essay

Old Masters, New World

...In the Gilded Age, newly wealthy Americans began to compete for Europe’s extraordinary Old Master pictures, causing a major migration of art across the world. Old Masters, New World is a look at the cutthroat competition, financial aspect, intrigue, and double-dealing often involved in these paintings. It is also about the power of the amazing paintings that drove these collectors such as financier J. Pierpont Morgan, sugar king H. O. Havemeyer, Boston aesthete Isabella Stewart Gardner, and industrialist Henry Clay Frick. It is a great book about the arrival of the artwork of the Old Masters such as Raphael, Michelangelo, and El Greco in the United States. On one hand, it was definitely about the acquisition of Old Masters paintings from Europe by Americans. However, this book was not about artwork at all; instead, it was much more about the people who bought the art. The movement began when these extremely wealthy people bought very expensive and exquisite paintings. They bought these works of art for people to admire their wealth and taste. Old Masters New World is about the Americans of the late 19th century who found themselves interested in bringing the art of the Old Masters across the ocean. Saltzman does her best to give each of these people a voice and personality, to bring them to life for the reader. You will get to know each of these people and their histories. While there is definitely a discussion of art, the book is much more about the world of art dealing...

Words: 579 - Pages: 3

Premium Essay

Master Limited Partnerships

...Equity Research Report Sector: Master Limited Partnerships (MPLs) Stock: MarkWest Energy L.P. (NYSE: MWE) The sector that this research report will cover is Master Limited Partnerships (MLPs) and the stock within this sector is MarkWest Energy Partners, L.P. (MWE). Master Limited Partnerships is a business that has the tax structure of a partnership, but the ownership equity of the business trades on an exchange. In the MLPs sector, a unitholder is someone who owns stock in the company, making them part owner of the business. MLPs have two different kinds of partners, general partners and limited partners. General partners manage the daily operations of the business and own a small stake in the company. The group that has a larger stake in the company is the limited partners, who have no role in management, but they provide capital to the company and receive regular cash distributions in the form of dividends. The majority of MLPs are oil and gas midstream and downstream activities such as gathering, processing, transportation, storage and refining of oil or natural gas. The structure of how MLPs are set up allows them to avoid corporate income tax. Instead, MLPs flow income and losses through to the limited partners, which is the equity stake of the company. With this structure, unitholders pay taxes on their own individual tax returns, which provides MLPs the flexibility and opportunity to raise capital directly from the stock market by issuing new shares. In...

Words: 2235 - Pages: 9

Premium Essay

Masters of Business Administration

...DISSERTATION/PROJECT CORPORATE FINANCE INVESTMENT THEORY STRATEGIC MANAGEMENT Activities Fees Total Cr. 12 Grand Total MASTER OF BUSINESS ADMINISTRATION (1 YEAR) 17 BRAC Bank Ltd. Collection Booth SEU Campus # 2 (GF) Spring Name ID# Summer FIROZ AHMED 2 0 1 Fall 4 SL# Course Code 1 2 3 4 BUS8101(4) FIN6150(2) FIN6161(1) MGT5199(1) Prev Grade Credit Hour Criteria Amount (TK) 3 3 3 3 Regular 10800 Regular 10800 Regular 10800 Regular 10800 1000 44200 Signature of Student Date: Academic Advisor/ Registration Officer Date: Chairman/Coordinator Date: Received by Program Office Date: Southeast University Course Registration Form (Credit Voucher) Year : Program 0 1 0 0 0 4 0 0 4 Batch MASTER OF BUSINESS ADMINISTRATION (1 YEAR) 17 BRAC Bank Ltd. Collection Booth SEU Campus # 2 (GF) Spring Name ID# Summer FIROZ AHMED 2 0 1 Fall 4 *** Amount paid as 1st Installment @ 40% of total fees - 17680 Signature of Student Date: BRAC Bank Ltd. Date: Southeast University Course Registration Form (Student's Copy) [ Preserve this document for future reference.] Spring Name ID# Summer FIROZ AHMED 2 0 1 4 0 1 0 0 0 4 0 0 4 Fall Program Batch Course Title DISSERTATION/PROJECT CORPORATE FINANCE INVESTMENT THEORY STRATEGIC MANAGEMENT Activities Fees Total Cr. 12 Grand Total 17680 *** Amount paid as 1st Installment @ 40% of total fees Year : MASTER OF BUSINESS ADMINISTRATION (1 YEAR) 17 Prev Grade Credit Hour Criteria Amount (TK) 3 3 3 3 Regular 10800...

Words: 348 - Pages: 2

Free Essay

Masters of Social Work

...The MSU Masters of Social Work Program I had the opportunity to spend some time with an Missouri State University official learning some information on their Masters of Social Work Program. The MSW is currently offered at two locations: one is Joplin and the other is Springfield. I spent time at the Joplin location taking a look at the MSW. The MSW offered by Missouri State is available from two tracks. The first track is the Regular Program. This is a track for people that have a bachelor’s degree in a field other than social work. Students can attend on a part time or full time basis. The part time classes would require four years to obtain your MSW. The full time student could obtain the MSW in 2 years. The second track available is for Advanced Standing students. These are students that have a Bachelor of Social Work Degree. For this track a student is only required to take 34 credit hours. A full time student can complete this track in one year. A part time student will require two years to obtain the MSW. The MSW program at MSU has an emphasis of Family Health Perspective. The Family Health Perspective is one that is a key foundation for social workers on a micro or macro level. It focuses on using family health and stability as an overall key to assisting the family in achieving holistic wellness. It looks at all aspects of the family environment and uses the seven domains of family wellness in assessment and intervention: physical, mental, emotional...

Words: 351 - Pages: 2

Free Essay

Master-Slave Dialectic Hegel and Fanon Views

...Name: Instructor: Course: Date: Master slave relationship and dialectic Fanon - Black Skin White Masks Black Skin and Hegel Self Consciousness “In this experience self-consciousness learns that life is essential to it as pure self-consciousness. One (self-consciousness) is self-sufficient; for it, its essence is being-for-itself. The other is non-self-sufficient, for it, life, that is, being for an other, is the essence. The former is the master, the latter is the servant” (Hegel 189). Hegel suggests in the dialectic that there is coherence between subject and object, concrete and abstract, part and whole, and for the purpose of dialectic, master and slave. Hegel believes that “master” is a “consciousness.” The consciousness defines itself in mutual relations to what is referred to as slave’s consciousness. This occurs in a process of mutual interdependence and mediation. Hegel uses his Phenomenology of Spirit to provide his understanding and exposition of master slave dialectic as an account of both the need of recognition and emergence of self-consciousness. Hegel’s line of thought and work plays a crucial role in Fanon’s exposition of the colonization by the Western. Fanon exposition focuses more on violence and race. Violence adds urgency, complicates and is driven by the need for recognition. An optimistic and promising moment lurks in Fanon’s Black Skin White Masks. The promising moment in Fanon’s work is articulated in a humanity characterization...

Words: 3820 - Pages: 16

Premium Essay

Why I Want a Masters of Business Administration

...Why I want a Master’s of Business Administration Brian Simpson Management MGT/521 05 February 2010 Dr. Robert Larkin Why I want a Master’s of Business Administration There are a myriad of reasons one would pursue a Master’s of Business Administration degree or better known as MBA. It takes a high level of mental stamina and drive to accomplish the goal notwithstanding they are working a full-time job. I have been working toward accomplishing the MBA for enhancing my career and to establish precedence within my family. This paper will enlighten the reader of why the degree of an MBA. Enhancing My Career Recently, I was offered a job and have since accepted the position as an electronic quality assurance representative to monitor the Department of Defense contracts of private companies in the Reno/Sparks area. I chose this position because of the experience that I gained via the military. I chose this field because I want to do my part to ensure the Department of Defense continues to be provided with a quality product. I have 11 years experience performing analytical research and inspections of several types of avionics systems. I have the technical experience to perform the job however; I do not have an inkling of how the inner workings of a private business work. I believe a MBA would assist me to have an understanding of my job and the company that has the contract that I would be overseeing. Jungian Personality Assessment Recently, I had partaken...

Words: 746 - Pages: 3

Premium Essay


...attacked and conquered Kalinga (present day Orissa). Although he had conquered many other places, this violent war was the last war he ever fought and a turning point of his career. He was disgusted by the extreme deaths of numerous civilians, especially the Brahmans. All these misfortunes brought Ashoka to turn into a religious ruler compared to a military ruler. As he turned to Buddhism, he emphasized dharma (law of piety) and ahimsa (nonviolence). He realized he could not spread Buddhism all by himself and therefore appointed officers to help promote the teachings. These officers were called Dhamma Mahamattas or "Officers of Righteousness"" They were in charge of providing welfare and happiness among the servants and masters. Preventing wrongful doings and ensuring special consideration was also their duty. Emphasizing his role as king, he paid close attention to welfare, the building of roads and rest houses, planting medicinal trees, and setting up healing centers. In order to pursue ahimsa, Ashoka gave up his favorite hobby of hunting and...

Words: 312 - Pages: 2

Premium Essay


...Marketing Management (AMN442) Assignment Introduction Masters Home Improvement is the trading name of an Australian Home Improvement chain, operated by a joint venture between Australian Retailer Woolworths Limited and Mooresville, North Carolina (United States) based hardware chain, Lowe's.[2] Masters was created as a way for Woolworths Limited to crack into the hardware retail space, which has been historically dominated by Bunnings Warehouse, which is owned by arch rival Wesfarmers. The two companies already compete with each other with groceries and general merchandise. The brand name was announced on 2 May 2011,[3] coinciding with the launch of a website at[4] Hans Hulsbosch, who has designed brand identities for Woolworths & Qantas designed the Masters brand and logo.[5] The first outlet, located in Braybrook, Victoria, opened to tradesmen on 31 August 2011, and the general public on 1 September 2011.[6] In the Sydney Morning Herald, CEO Don Stallings is attributed as saying that staff will be trained for at least 100 hours, and the stores will offer over 35,000 products.[7] Ways in which Masters will differentiate from its competitors include stores which are more brightly lit, more colourful with polished concrete, large colour signage and store displays, it aims to place more emphases on attracting female shoppers, buzzers scattered around the store which when pressed, will send a nearby staff member to that location to help out a customer,...

Words: 2133 - Pages: 9

Free Essay

This Is My Essay

...This is my essay. There are many like it, but this one is mine. My essay is my best friend. It is my life. I must master it as I must master my life. My essay, without me, it’s useless. Without my essay, I am useless. I must write my essay true. I must write better than my enemy, who is trying to copy me. I must copy him before he copies me. I will… My essay and I know that what counts in this class is not the essays we write, the length of the paper, nor the sources we cite. We know that it is the grades that count. We will pass… My essay is human, even as I, because it is my life. Thus, I will learn it as a brother. I will learn its weaknesses, its strength, its parts, its paragraphs, its intro and its conclusion. I will keep my essay clean and ready, even as I am clean and ready. We will become part of each other. We will… Before God, I swear this creed. My essay and I are the defenders of my grade. We are the masters of our class. We are the saviors of my GPA. So be it, until graduation is mine, and there is no homework, but vacation! This is my essay. There are many like it, but this one is mine. My essay is my best friend. It is my life. I must master it as I must master my life. My essay, without me, it’s useless. Without my essay, I am useless. I must write my essay true. I must write better than my enemy, who is trying to copy me. I must copy him before he copies me. I will… My essay and I know that what counts in this class is not the essays we...

Words: 1091 - Pages: 5

Premium Essay

Night John Family Structure

...mother and father as she learned that her mother was sold from her at four years of age.She could never figure out her history due to the purposeful disconnection put into act by the master.¨I was just a little thing taken away from my mother and father just when I needed them the most ¨ Mingo Whiteś Narrative. This occurrence of broken families took a toll on many slaves as they grew up to be curious of who they were. If they wanted to know anything about them they were harshly restricted from learning so they couldn't read. According to Frederick Douglass's Narrative ¨Frequently, before the child has reached its twelfth month, it mother is taken from it¨.This purposeful displacement of the parents and the child hindered the affection between elders with the child. It was completely designed to destroy the bond of the mother and child to prevent teaming up and cleverness being built in the relationship. This broken family structure was heavily touched on to convey the impact it had on many slaves and how they became clever enough to start learning how to read and learn names and numbers in their...

Words: 1047 - Pages: 5