If we talk about the cost of capital, it is necessary to understand by this expression how much the company costs all the capital that it uses. To determine this cost, a number of steps should be taken.
Instructions
Step 1
The cost of capital can be viewed as financial compliance with the size of the financial responsibility of the company, which it takes upon itself for the use of debt and equity capital to organize its activities. Determine the value of the bonds that the investor issues. Their cost will be practically equal to the interest paid on these bonds. Take into account the difference between the declared value of the bond (share) and between its real selling price. To do this, you need to divide the amount of net profit by the number of bonds (shares) issued by the company.
Step 2
Calculate (calculate) the value of the current dividends that are paid to shareholders, or those that are supposed to receive from this company (these are certain cash payments that are calculated from the company's net profit). Please note that there are some difficulties in predicting the expected value (amount) of the company's net profit and the actual dividend payout.
Step 3
Determine the cost of all types of financing (the company's debt capital) and the cost of the company's equity capital. Determine the price and value of your company's capital assets. Depending on the degree of risk, the market rate of return of the shares will be established, on the basis of which you will calculate the price of capital assets.
Step 4
Calculate the indicators of the weighted average cost of capital. Thus, the weighted average cost of capital helps determine the level of real compensation for all capital investors for refusal. Here, also take into account the fact that the share of contributors in the field of financing the company is unequal, which means that the contribution of each contributor to the total amount of financing is taken into account.
