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Cost of Capital - educ.jmu.edu

The cost of Capital A reading prepared by Pamela Peterson Drake OUTLINE. 1. 1. 2. Determining the proportions of each source of Capital that will be 3. 3. Estimating the marginal cost of each source of Capital .. 3. A. The cost of debt .. 3. B. The cost of preferred equity .. 4. C. The cost of common equity .. 5. 4. Calculating the weighted average cost of Capital .. 8. 5. Reality check .. 9. 6. 10. 1. Introduction The cost of Capital is the company's cost of using funds provided by creditors and shareholders.

The cost of capital is the company's cost of using funds provided by creditors and shareholders. A company's cost of capital is the cost of its long-term sources of funds: debt, preferred equity, and common equity. And the cost of each source reflects the risk of the assets the company invests in. A

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