The Cost of Capital - Basic Definitions
3 important questions on The Cost of Capital - Basic Definitions
What are capital components?
One of the types of capital used by firms to raise funds.
Debt
Preferred stock
Common equity
The cost of each component is called its component cost
Debt
Preferred stock
Common equity
The cost of each component is called its component cost
What is rd(1-T)?
After tax component cost of debt
T = marginal tax rate
T = marginal tax rate
What are wd, wp, and wc?
Target weights of debt, preferred stock and common equity
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