ACCT 201 Lecture 18: CPA_20_Chapter_9_Sections_4_5

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2 Feb 2017
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Dr. ron a. rhoades (cid:494)da bear and purveyor of great pre-(cid:887)99(cid:886)(cid:495)s music. Review: the cost of capital for both bonds and preferred stock. In the last cpa we explored the concept of the (cid:498)cost of capital(cid:499) generally. We then explored how to calculate by multiple means i. e. , how we determine the (cid:498)weighted average cost of capital. (cid:499) In this cpa we turn to an exploration of the cost of capital for common stock. Lastly, we explore what happens if capital is raised for a project. Learn how to calculate the cost of capital for common equity (i. e. , common stock): by the gordon growth model, by capm. Learn about the weighted average cost of capital (wacc) Costs related to new issues of common stock: discounts relative to new market price (underpricing) Weighted average cost of capital (wacc: book value vs. market value weights. Market value weights: historical vs. target weights.

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