Hrm 531 Week 4 Case Study
Week 4 Discussion Questions
• What are main elements in calculating the cost of capital? How does an increase in debt affect it? How do you identify an organization’s optimal cost of capital?
• The main elements in calculating the cost of capital are cost of debt, cost of equity, preferred stock and common stock.
• An increase in debt indicates a higher risk which can increase the required rate of return which raises the cost of capital. Higher debt can also accrue additional costs.
• By mixing the permanent sources of funds used by the organization that will maximize their common stock price or searching for the funds mix that will minimize the organization’s composite cost of capital.
• What is meant by WACC? What are some components
• What are main elements in calculating the cost of capital? How does an increase in debt affect it? How do you identify an organization’s optimal cost of capital?
• The main elements in calculating the cost of capital are cost of debt, cost of equity, preferred stock and common stock.
• An increase in debt indicates a higher risk which can increase the required rate of return which raises the cost of capital. Higher debt can also accrue additional costs.
• By mixing the permanent sources of funds used by the organization that will maximize their common stock price or searching for the funds mix that will minimize the organization’s composite cost of capital.
• What is meant by WACC? What are some components