【小梅子】評論

Cost of capital is the minimum rate of return or profit a company mustearn before generating value. It’s calculated by a business’s accountingdepartment to determine financial risk and whether an investment is justified. Cost of Debt = (Risk-FreeRate of Return + Credit Spread) × (1 – Tax Rate)Cost of Equity = Risk-FreeRate of Return + Beta × (Market Rate of Return - Risk-Free Rate of Return) The weightedaverage cost of capital (WACC) isWACC = (E/V x Re) + ((D/V x Rd) x (1 – T))Here’s a breakdown ofthis formula’s components:·      E: Market valueof firm’s equity·      D: Market valueof firm’s debt·      V: Total value ofcapital (equity + debt)·      E/V: Percentageof capital that’s equity·      D/V: Percentageof capital that’s debt·      Re: Required rateof return·      Rd: Cost of debt·      T: Tax rate