## COURSE

## Cost of Capital

This course is a part of CFA Level I study material.

The cost of capital is the rate of return that a firm pays to bondholders and equity holders. Cost of capital is an important measure while making investment decisions, as any one making an investment would expect a higher return from his investment in a company compared to what he could earn from an alternative investment with equivalent risk.

In this reading, we will learn about how to calculate the weighted average cost of capital, and how marginal cost of capital is used in determining the NPV of a project. We will also learn about how to calculate the cost of each type of capital raised by a company such as debt, preferred stock, and common equity. Finally, we will look at marginal cost of capital schedule, and correct treatment of flotation costs.

#### Course Downloads

- The cost of capital is the rate of return that a firm pays to bondholders and equity holders. Cost o...
- From the perspective of an investment analyst, the weights used in the calculation of WACC should b...
- The marginal cost of capital plays an important role in capital budgeting and investment decisions. ...
- Previously, we reviewed the concept of weighted average cost of capital and its formula. This video ...
- Cost of debt refers to the cost of financing a company using debt such as a bond issue or bank loan....
- We discussed that the cost of debt for a company can be measured using the [YTM or Debt-Rating appro...
- Cost of preferred stock is the cost that the company has committed to pay to the preferred stockhold...
- The cost of common equity is represented as re, and it is the rate of return required by the common ...
- While calculating the cost of equity, it is important for an analyst to calculate the beta of the co...
- In the previous article, we learned about how to calculate the [beta of a publicly traded company’s ...
- In developed nations, the beta of a stock adequately captures the country risk (Historical evidence)...
- MCC Schedule is a graph that relates the firm’s weighted average of each dollar of capital to the to...
- While raising new capital, a company incurs cost, which is paid as a fee to the [investment bankers]...