Ch.12 Cost o of capital WALL ST o 2002 Prentice Hall. Inc
Ch. 12 Cost of Capital © 2002, Prentice Hall, Inc
Where weve been Basic Skills: (Time value of money Financial Statements) Investments: (Stocks, Bonds, Risk and Return) Corporate Finance: (The Investment Decision -Capital Budgeting)
• Basic Skills: (Time value of money, Financial Statements) • Investments: (Stocks, Bonds, Risk and Return) • Corporate Finance: (The Investment Decision - Capital Budgeting) Where we’ve been
Assets Liabilities equity Current assets Current liabilities Fixed assets Long-term debt Preferred Stock Common equity
Assets Liabilities & Equity Current assets Current Liabilities Fixed assets Long-term debt Preferred Stock Common Equity
TThe investment decision Assets Liabilities equity Current assets Current liabilities Fixed assets Long-term debt Preferred Stock Common equity
Assets Liabilities & Equity Current assets Current Liabilities Fixed assets Long-term debt Preferred Stock Common Equity The investment decision
Where were going. Corporate Finance: The Financing Decision Cost of capital Leverage Capital structure Dividends
• Corporate Finance: (The Financing Decision) Cost of capital Leverage Capital Structure Dividends Where we’re going
Assets Liabilities equity Current assets Current liabilities Fixed assets Long-term debt Preferred Stock Common equity
Assets Liabilities & Equity Current assets Current Liabilities Fixed assets Long-term debt Preferred Stock Common Equity
The financing decision Assets Liabilities equity Current assets Current liabilities Fixed assets Long-term debt Preferred stock ommon Equity
Assets Liabilities & Equity Current assets Current Liabilities Fixed assets Long-term debt Preferred Stock Common Equity The financing decision
assets Liabilities equity Current assets Current liabilities Long-term debt Preferred stock ommon equi
Assets Liabilities & Equity Current assets Current Liabilities Long-term debt Preferred Stock Common Equity
assets Liabilities equity Current assets Current liabilities Long-term debt Capital Structure<Preferred Stock Common equity
Assets Liabilities & Equity Current assets Current Liabilities Long-term debt Preferred Stock Common Equity Capital Structure
Ch. 12-Cost of capital For nvestors the rate of return on a security is a benefit of investing. For Financial Managers, that same rate of return is a cost of raising funds that are needed to operate the firm In other words, the cost of raising funds is the firms cost of capital
Ch. 12 - Cost of Capital • For Investors, the rate of return on a security is a benefit of investing. • For Financial Managers, that same rate of return is a cost of raising funds that are needed to operate the firm. • In other words, the cost of raising funds is the firm’s cost of capital