FIN 486 Week 3 Video Summary Short Term Finance For more course tutorials visit www . uophelp . com
e ) calculate the firms weighted average cost of capital using retained earnings and the capital structure weights
f ) calculate the firms weighted average cost of capital using new common stock and the capital structure weights
a . Cost of debt : Proceeds from sale of $ 1,000 par value bond :
b . Cost of preferred stock : rp = Dp ÷ Np
c . Cost of common stock : rj = RF + [ bj × ( rm − RF )]
d . Weighted average cost of capital : ra = ( wi × ri ) + ( wp × rp ) + ( ws × rn )
e . 1 . Change in risk Premium : Change in beta × market risk premium
Note : 17.5 % − 15.7 % = 1.8 % 2 . Revised weighted average cost of capital : ra = ( wi x ri ) + ( ws x rn )
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FIN 486 Week 3 Video Summary Short Term Finance For more course tutorials visit www . uophelp . com