Corporate Finance

2.23 Cost of capital
1) Calculate the company’s cost of equity using various methods (at least 2); showing your calculations and detailing the source of your data.
2) Calculate the company’s cost of debt; showing your calculations and detailing your assumptions and the source of your data.
3) Calculate the company cost of capital; showing your calculations.

1, CAPM
2, Dividend growth model (DGM)
3, Select between CAPM and DGM method. Which one do you feel is more accurate/appropriate and why? Use this to calculate the WACC.
4 What does your calculated cost of capital tell you about the type of future projects that the
company can consider? How does knowing the cost of debt and capital help the financial managers in deciding the
optimum capital structure?
5 Business loans

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