This course is about Cost of Capital. Every business raise various forms of Capital for running the business.None of the funds are free. Each fund comes with a cost. Every Entrepreneur, every Finance Manager should be aware of the Cost of Capital of their business.
Many businesses fail, because the management itself would not be aware of the Cost of Capital of the business.
Unless the returns earned from the business is greater than or equal to cost of capital, no business can sustain / grow.
Cost of Capital is used to evaluate new projects of a company. It is the minimum return that investors expect for providing capital to the company, thus setting a benchmark that a new project has to meet.
For an investment to be worthwhile, the expected return on capital must be greater than the cost of capital. The cost of capital is the rate of return that capital could be expected to earn in an alternative investment of equivalent risk. If a project is of similar risk to a company's average business activities it is reasonable to use the company's average cost of capital as a basis for the evaluation. A company's securities typically include both debt and equity, one must therefore calculate both the cost of debt and the cost of equity to determine a company's cost of capital. However, a rate of return larger than the cost of capital is usually required.
This course explains the technicalities involved in computation of Cost of Capital through simple examples, case studies, etc.
Students will learn how to compute
a) Cost of Equity;
b) Cost of Preference Share Capital;
c) Cost of Debt Funds.
Students will also learn how to compute the Weighted Average Cost of Capital. Knowledge on Weighted Average Cost of Capital is very important for any one who is planning to pursue career in Finance. This course is structured in self learning pace. Take this course to understand the nuances of Cost of Capital for running profitable business.
Section 1: Introduction
- Introduction to Cost of Capital
- Weighted Average Cost of Capital
Section 2: Cost of Debt
- Cost of Debt
- Cost of Irredeemable Debentures
- Cost of Redeemable Debentures
- Case Study on Cost of Debentures
Section 3: Case Study on Cost of Preference Shares
- Cost of Preference Shares
- Cost of Redeemable Preference Shares
Section 4: Case Study on Compuation of Cost of Equity
- Cost of Equity
- Cost of Equity under Dividends Price Approach
- Cost of Equity under Earnings Price Approach
- Cost of Equity under Realised Yield Approach
- Cost of Equity under Capital Asset Pricing Model
- Case Study on Cost of Equity
- Problem - Implied Return on Equity
- Problem on WACC (Additional Finance)
Section 5: Case Studies on Weighted Average Cost of Capital
- Case Study on WACC and Cost of Equity
- Problem on WACC (Book Value and Market Value)
- Problem on WACC (With Additional Borrowings)
- Problem 1 on WACC (Book Value and Market Value)
- Problem 2 on WACC (Book Value and Market Value)
Language of instruction: English