7The Cost of Capital

The Cost of Capital

Assumptions

Assumptions

Special Sources of Capital

Spesific Sources of Capital

Cost of Long Term Debt

Cost of Long Term Debt

Cost of Long Term Debt

2000,1$

000,1$

NdnNd

Ird

Cost of Long Term Debt

)1( Txrr di

Cost of Preferred Stock

p

pp N

Dr

Cost of Common Stock

Cost of Common Stock

gP

Drs

0

1

FmFs RrbRr

Cost of Retained Earnings

Cost of Retained Earnings

sr rr

Cost of New Issues of Common Stock

gN

Dr

nn 1

Weighted Average Cost of Capital

nrsppiia rwrwrwr /

Weighting Schemes

Marginal Cost and Investment Decision

Weighted Marginal Cost of Capital

j

jj w

AFBP

Investment Opportunities Schedule