Financial Management

13

Cost of Capital

“Money, like any other material, bears a cost, even if it is the money kept in your pocket…”

 

Anonymous

LEARNING OBJECTIVES

After reading the chapter, you will be able to:

1. Understand the concept of cost of capital and its rationale.

2. Discuss the different types of debt and understand the calculation of their costs.

3. Discuss the different types of preference capital and understand the calculation of their costs.

4. Understand cost of equity and discuss the dividend growth model and the capital asset pricing model (CAPM).

5. Understand the concept of retained earnings and the calculation of its cost.

6. Discuss the concept and calculation of weighted average cost of capital (WACC).

7. Analyse the various factors affecting the cost of ...