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