Chapter 11 The Cost of Capital

A photo of a gear, wrench, and nut and bolt set.

Learning Objectives

  1. LO1

    Understand the different kinds of financing available to a company: debt financing, equity financing, and hybrid equity financing.

  2. LO2

    Understand the debt and equity components of the weighted average cost of capital (WACC) and explain the tax implications on debt financing and the adjustment to the WACC.

  3. LO3

    Calculate the weights of the components using book values or market values.

  4. LO4

    Explain how the capital budgeting models use WACC.

  5. LO5

    Determine a project’s beta and its implications in capital budgeting problems.

  6. LO6

    Select optimal project combinations from a company’s portfolio ...

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