evaluation of capital structure of a company Free Essay, Term Paper and Book Report
The capital structure of a firm is a mix of a firm's permanent long term financing represented by debt, preferred stock & common stock equity. It's concerned with the effect of capital market decision on security price.
in this term paper, we consider only debt and equity financing.
Cost of equity:
cost of equity is the required rate of return on investment of the equity shareholders of the company. it's calculated through following process:
here we consider market price per share & dividend per share.
cost of debt:
cost of debt is the required rate of return on investment of the lenders of a company. it's calculated through following process:
here we consider the interest(I) and the total amount of debt(D)
WACC stands on the weighted average cost of capital also known as the overall capitalization rate calculated on the basis of the weight provided by equity and debt amount respectively multiplied with the cost of equity and the cost of debt.
MCC stands on the marginal cost of cap......
Word Count: 731
Page Count: 2.9 (250 words a page / double spaced)
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