Capital Structure and Budgeting free essay sample

A paper which examines the components and calculations of weighted cost of capital using a case study format. Need write the essay? We know how. This paper examines a method for estimating targeted capital structure using data extracted from a firms financial statements. The weighted cost of capital (WACC) with its components: debt, common and preferred stock are calculated. The cost of retained earnings is calculated and explained. Issues regarding the computation of net present value (NPV) and internal rate of return (IRR) are explored in relation to capital budget questions. Additional issues management should evaluate when considering capital expenditures are discussed. For most firms the average cost of capital is the combined cost of capital raised from the sources that the firm uses (Brigham Ehrhardt, 2002a, p. 421). Each capital component will have its own minimum rate of return, expected by the investors, who provide that form of capital (p. We will write a custom essay sample on Capital Structure and Budgeting or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page 421). This combined capital cost is termed the weighted average cost of capital or WACC (p. 421). Typically capital is obtained from the components of debt (preferred and common) and stock (p. 420).