Finance cost of capital

Finance cost of capital

1.Find cost of capital for a company of your choice.

2.Propose an expansion project for the company from question 1 in a business area that is different from its current area(s). Find asset return in the proposed area of business. Find weighted average cost of capital of the expansion project assuming that the company would finance it with the same mixture of debt and equity as the rest of the company.

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1. Find the cost of capital for a company of your choice.
Steps involved: Determine equity beta, determine its current capital structure, determine its pre-tax cost of debt (keep in mind that deciding value of debt for companies with low credit rating involves a different approach than for companies with low debt rating), determine the weighted average cost of capital (r WACC)
The cost of capital refers to the opportunity cost of making a specific investment over another.

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