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Cost of Capital and its Components: An Application

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  • Halil D. Kaya

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.

Suggested Citation

  • Halil D. Kaya, 2016. "Cost of Capital and its Components: An Application," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 6(5), pages 246-257, May.
    • Handle: RePEc:hur:ijarbs:v:6:y:2016:i:5:p:246-257
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    More about this item

    Keywords

    Capital Structure; Cost Of Capital; Cost Of Debt; Cost Of Preferred Stock; Cost Of Common Stock; Project Valuation;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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