Corp Finance #10 Cost of Capital–Debt & Equity Financing

Learn weighted average cost of capital (WACC), debt financing, & equity financing from a Certified Public Accountant CPA

Language: english

Note: 4.5/5 (50 notes) 23,423 students

Instructor(s): Robert (Bob) Steele

Last update: 2022-02-17

What you’ll learn

• Calculate weighted average cost of capital (WACC)
• Calculate the cost of debt
• Calculate the cost of preferred stock
• Calculate the cost of common stock
• Explain the optimal company capital structure
• Understand how taxes impact the cost of capital decision

Requirements

• Basic understanding of corporate finance concepts

Description

This course will discusses weighted average cost of capital, debt, and equity financing from a corporate finance perspective.

We will include many example problems, both in the format of presentations and Excel worksheet problems. The Excel worksheet presentations will include a downloadable Excel workbook with at least two tabs, one with the answer, the second with a preformatted worksheet that can be completed in a step-by-step process along with the instructional videos.

The general idea we want to keep in our mind is that businesses are looking to invest assets in order to receive a return. Capital, or financing, is needed for the capital investments. A company could generate the capital from internal operations, but often looks for other sources of financing to facilitate faster growth and quicker revenue generation.

The options to acquire capital include debt financing and equity financing. As a company thinks about their financing options, they should have an understanding of their financing structure. The weighted average cost of capital (WACC) is often used for financing decisions. This course will demonstrate the WACC calculation.

Learners will understand how to calculate the cost of debt. One of the primary forms of debt financing are corporate bonds, the cost including interest payments on the bonds. Taxes have a big impact on financing decisions. Bond interest is generally tax deductible.

We will also consider preferred stock financing. In many ways preferred stock is similar to debt financing because of the payments that are somewhat standardized. However, preferred stock does not have a maturity date and the payments are not generally tax deductible.

The course will demonstrate common stock financing, a form of equity financing. It can be more difficult to value the cost of common stock financing and we will consider methods in doing so.

Course content

• Introduction
• 1105 Cost of Capital Debt Equity Financing Overview
• 1110 Weighted Average Cost of Capital WACC
• 1115 Cost of Debt
• 1120 Cost of Preferred Stock
• 1125 Cost of Common Equity
• 1130 The Optimal Capital Structure
• Practice Probs. – The Cost of Capital – Debt / Equity Financing
• OneNote Resource
• 1114 Cost of Debt After Tax Prob 1
• 1115 Cost of Debt After Tax Prob. 2
• 1117 Cost of Debt After Tax Interest Rate Calculation
• 1119 Cost of Debt After Tax Interest Rate Calculation
• 1120 Calculate Change in Cost of Debt After tax Due to Reduced Tax Rates
• 1123 Cost of Preferred Stock Percent
• 1126 Financing Common Stock Prob 1
• 1127 Financing Common Stock Prob. 2
• Excel Probs. – The Cost of Capital – Debt / Equity Financing
• 1112 Weighted Average Cost of Capital (WACC)
• 1114 Cost of Debt After Tax Prob 1
• 1115 Cost of Debt After Tax Prob 2
• 1117 Cost of Debt After Tax Interest Rate Calculation
• 1119 Calculate Bond After Tax Cost to Issue
• 1120 Calculate Change in Cost of Debt After Tax Due to Reduced Tax Rates
• 1123 Cost of Preferred Stock Percent
• 1124 Calculate Preferred Stock Current Yield
• 1125 Financing Debt vs Preferred Stock
• 1126 Financing Common Stock Prob 1
• 1127 Financing Common Stock Prob 2

Time remaining or 871 enrolls left

 Don’t miss any coupons by joining our Telegram group