Weighted Average Cost of Capital and Investment Decisions
Document Type:Research Paper
Subject Area:Accounting
First, we must note that, we are to use the dividend discount model to come up with the Weighted Average Cost of Capital. Moreover, it is worth noting that, to come up with the true figure for the WACC, various items such as the tax rate, the market value and the capital structure must be given out The concept of Dividend Discount Model refers to the process in which the price of a stock is valued by predicting the dividends and at the same time discounting back to the present value In the calculation of the Weighted Cost of Capital, the following formula will hold Weighted Average Cost of Capital = (E/V x Re) + (D/V x Rd) x(1 – Tc) Based on the following calculations of Wilson Corporation’s weighted average cost of capital 6.
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