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Essay / Research Paper Abstract
This 5 page paper looks at a case study provided by the student and calculates the cost of debt, the cost of equity and then brings them together to calculate the total cost of capital. The bibliography cites 2 sources.
Page Count:
5 pages (~225 words per page)
File: TS14_TERondo3.rtf
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Unformatted sample text from the term paper:
such as share capital (also known as equality), loan capital and debt. The cost of capital is a combination of all of these factors. There are many debates over which
combination will result in the lowest or highest cost of capital, with gearing increasing the debt repayments, but potentially increasing risk and increasing the demand for a return on the
shares and as such capital costs can be increased and counteract and decrease that a lower debt rate may create. The approach to calculating the cost of capital may
take place in several ways. The most common is the, the calculation of the cost of equity and the cost of loans and debt which is then calculated proportionally and
result is the total cost of capital. However, although this sounds simper there are many variations that can take place. If we look at the cost pf capital we can
first divided this into two sections, the calculation of the cost of the debt and the cost of the equity. These can then be brought together to calculate the cost
of the total capital. The cost of debt usually consists of all the capital in the company that is classified as long term debt. Short term debt is often
to fleeting and the cost is built into contracts that are undertaken ranging than financing arrangements. If we undertake this is the simplest way we look at the debt and
the payments that are being made on the debt and work pout what the level of interest or payments are to the total amount of debt by undertaking a proportional
calculation. This is a simple calculation, it involves taking the debt and the interest rate and calculation what percentage it is of the total debt, and then taking that percentage
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