Scribd Logo
Upload

Welcome to Scribd!

  • CH12 Marwa

    Uploaded by

    Fatma Sulaiman
    5 views2 pages
    1. The weighted average cost of capital (WACC) is used to calculate the expected return of a project or company based on the average costs of the different sources of funding, weighted by their respective proportions. 2. WACC is calculated by taking the cost of each component (debt and equity), weighted by the proportion of debt and equity in the company's target capital structure, accounting for corporate taxes. 3. WACC should only be used when the risks of a project or company's operations match the risks of the debt and equity being used to fund it.

    Original Description:

    Original Title

    CH12 marwa (2)

    Copyright

    © © All Rights Reserved

    Available Formats

    PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Report this Document
    1. The weighted average cost of capital (WACC) is used to calculate the expected return of a project or company based on the average costs of the different sources of funding, weighted by their respective proportions. 2. WACC is calculated by taking the cost of each component (debt and equity), weighted by the proportion of debt and equity in the company's target capital structure, accounting for corporate taxes. 3. WACC should only be used when the risks of a project or company's operations match the risks of the debt and equity being used to fund it.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    5 views2 pages

    CH12 Marwa

    Uploaded by

    Fatma Sulaiman
    1. The weighted average cost of capital (WACC) is used to calculate the expected return of a project or company based on the average costs of the different sources of funding, weighted by their respective proportions. 2. WACC is calculated by taking the cost of each component (debt and equity), weighted by the proportion of debt and equity in the company's target capital structure, accounting for corporate taxes. 3. WACC should only be used when the risks of a project or company's operations match the risks of the debt and equity being used to fund it.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 2

    CHlZ

    t"
    I-
    b.-l
    =
    Aisrr^rJ *,.l. of o' pro,lect' sho'^lJ
    sst{
    'lh' inatncial Levevage

    f
    b-.d
    *yeclel v.1u"'', a,^ o\ li,.oncto'\ t o P

    \k. erl.,^l lo o,hi.[', ^ t'"* velie-r


    I-
    ---tt
    Co-,7avab1e visk'
    ol^ deb*.
    r.-
    --l Eryeclel *"'l'''v" 4 cosl
    "?"i! 'f 1!x(B-
    tvt^tch is .r1"cltl veJ"v^ R= Rf
    cop;4^l'
    : '. , .. Be'{o. o0 a"sol.l of
    4he

    I:
    -.4
    :t. r^rill b" ns"l os Ji."ot^,.l t'
    .[ir,-, is {l.e be]o oP @vr^}no\^ slock'
    A o.t7 r^ri{h
    hod tt,e firr- bee^ *i''o'ncn
    Ac..pl i| cos{ oC eTsl-[F caFU
    - 7rnec12 nalt '
    i' ( IRR
    D xBa"b+
    B*"+ =
    I- COEC< IRR, Accep* #*B"piJ7* S+D
    -.rl e!.t^ ,r
    I. coEc > lRR R6ecl
    -.{
    r_-
    -.-rl co>l J ca'gi*al-> is oppor*"'i \ cosl lrl;l
    -li"*
    E
    -II oge"^li*'r ^ ft"r.
    crve -sinailorv lo
    f
    b iL

    e opev^'[io" s
    "9
    aF {!.e i,.lwlry;
    nr" Be{.^ S -: ','o.rP..[ Y6tue oP $rr*( eTniIY'
    L:
    --
    +h
    -[^e i^J''rsl'7 {" nsJ,,^ce es'lit'tcr*itu
    e'YYor'
    D' YY'1,)1i;,'j" M t'fh*'b
    I-
    -.{ gel,- oS c\ "lock is &1e"2'1^J is zevot
    f
    h-{
    *iP BeJ^ ol Jebl
    I.
    -.rl Ao -ell
    BArr.+ =
    #x
    Be7*i17

    I-
    -.rl
    ts{
    ff'evenr.er o$ sahe Carapanier
    'c7cle2
    I expowion

    ?o.vl7 ira
    Thase
    ll^"
    af h^si"es'
    co"*vocJ.o" Ph^se'
    o". d

    --l
    hi3L $elos Cosl oC i: vdttvn vauVed
    o Hi3\ CTclicatil / - iuvesJovs'
    by
    sD Jo.:J t"ecessavi 17 vnea-
    hi3L B "?,"i,
    o1116l. delen"inir''3
    v^ori es lrcftcnl
    2 *1)o" vtne'll"oA' hv
    -nol {h" .orJ oP n;AY
    Teclnt',ol ogy {t'^s, vt{ailev;7 a'Jorno{ive " , p-" - -L
    nodel
    r Jrvide,^J 6t"t^tl\ Rr- 3
    Cyclic*l r SML ov CAPM
    ?-@ -NT;-il'9 corl oP d"bl CRo) '
    is |ivmr
    11/

    ,l\ol i
    uJ"'
    OL = ?vo&rclio,. -/ b'qYqY-ilo
    7As"l"' Ro *Cr - +^D
    R g ,.01"r l^x =
    =
    tor- , T B"ln
    fivevage co*l "C cagilal' iP o' bo.J hai ,. r-a"l("'[ value " P
    g,^(fr-) * Rr^(fr) *(t-'tox) (selli,g a.I \9'/, o0 Eo''A),1I.". *o
    calcala{e u,eigh); ute o'q5 x Fatce valqc
    i+ ira\so colleJ ue\gh)"J aveYaee
    J prele'vveJ stock 'Gt-qly Div \reld)
    cos| oF caPi{at C R u,Hc. ) Cosl
    EvreJ slock ?^rs Jivid."Js* p,ef.rveJ
    ?r.
    Rs -> co:1 o0 e-7n'17 cagi{o-(
    evevT pevioJ fott'et 7 s\ocK'
    Rr= Rt* Br(R^- R+)
    R Div ,?o--+
    " Re0erred =
    - ?"
    Lovvotvin3 v^{e
    Rp
    - !ir-s
    .r"rl ratc ol n..- l,,bD' Cf rrt) WACC' i: *eJ o"l7 trhe" gv{ecL
    (t*l
    o' ho,,va szrvne visK. ": $i,-( cc'vvent
    D.bl l, EVuil7 ra{io = f,
    opev*liorr,s.

    .-?
    D 0.6 -- 6
    lo" JiPl",o^l PYd*{' 'nilL
    4iPfe'"'J "isk'
    \0
    at€ o\ JiPP",.^{ teperfe &*o*J t''f"'
    E

    D L d +10
    *sin3 WACC qtl
    E+D ,the .liune2 tea&-'[o

    C^pil,'t go.\nr \tetJ t


    Rr = Div TielJ +
    D'
    EP" b
    tncotfec{
    veirecl;o2
    il S i'rcveaJB; bf lO%, Rt 1 bf t0%

    DuiJe"J s V"ou\l tnoArt'


    o'*d
    - eosy )o P"6[2'5]o'^d
    Lr.s€
    if ergecJeJ 'e{"'. >
    R &'- aun)i,"
    - onl/ a'gpticabk *o
    cararPani€r
    Act"Pl
    Ja-l's
    c xve*17 ?n/i^? Ai'ui
    - "rlr"'n 12,
    "*t;Ji''
    * nl"
    --U
    ,nl"' iP e"pecleJ YJt'""< R {'o* e7"a'[io'r
    Rejec I
    SML
    R t o* r,nnnli* ;t
    ,.{j"J , $o, syrl""'o)ic visk 'lhe rr\rr\mur'vn
    - So,
    lo o'l( cov.potmiu , iC Be{a
    - .^yglia.iUre
    fott accepl'
    ir orvaitorble'
    t\*t'
    - Be)a va.vies ovev *h" l'^l^'"'
    - iI veties ,,^ iorl 'lo predrcl
    velioble'
    c^zhich i: .o;- a.-^Y
    c,,.sing ei-[l^ev ohe :

    D6M = sML ?
    s\ould b' .oual'
    bu] Ihe,e ,oinh,r Jill
    Ee

    di$leve"rder'

    You might also like