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2016•International Journal of Academic Research in Business and Social SciencesOpen access

Cost of Capital and its Components: An Application

Halil D. Kaya

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Abstract

This case deals with the estimation of cost of capital and its components.Students will learn how to estimate the cost of debt, the cost of preferred stock, and the cost of common stock.They will learn how to compute the weight of each cost of capital component and then they will estimate the overall cost of capital.Finally, they will discuss why certain types of capital are more expensive than others.This is a hands-on experience for students who want to learn more about corporate financing costs.

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This case deals with the estimation of cost of capital and its components.Students will learn how to estimate the cost of debt, the cost of preferred stock, and the cost of common stock.They will learn how to compute the weight of each cost of capital component and then they will estimate the overall cost of capital.Finally, they will discuss why certain types of capital are more expensive than others.This is a hands-on experience for students who want to learn more about corporate financing costs.

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Available abstract

This case deals with the estimation of cost of capital and its components.Students will learn how to estimate the cost of debt, the cost of preferred stock, and the cost of common stock.They will learn how to compute the weight of each cost of capital component and then they will estimate the overall cost of capital.Finally, they will discuss why certain types of capital are more expensive than others.This is a hands-on experience for students who want to learn more about corporate financing costs.

Key concepts: Weighted average cost of capital, Cost of capital, Marginal cost of capital schedule, Capital cost, Implicit cost, Cost estimate, Capital (architecture), Business

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