Cost of Capital & Investment Evaluation

Instructor: EDUCBA

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3 modules

Gain insight into a topic and learn the fundamentals.

7 hours to complete

Flexible schedule

Learn at your own pace

3 modules

Gain insight into a topic and learn the fundamentals.

7 hours to complete

Flexible schedule

Learn at your own pace

What you'll learn

Calculate cost of debt, equity, and preferred capital.
Apply CAPM to estimate required returns based on risk.
Use WACC to evaluate investments and financing decisions.

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There are 3 modules in this course

Learn how to calculate and apply the cost of capital to make better investment and financing decisions. Build practical skills in CAPM and WACC used in real-world corporate finance.

This course provides a structured approach to understanding how companies determine the cost of raising funds through debt and equity. You will explore how interest rates, taxes, and risk influence financing decisions and overall capital structure. You will learn how to calculate the cost of debt, preferred equity, and common equity, and apply the Capital Asset Pricing Model (CAPM) to estimate required returns based on systematic risk. The course also focuses on Weighted Average Cost of Capital (WACC), helping you understand how companies combine different funding sources to determine an overall cost benchmark for investment decisions. Through step-by-step examples, you will learn how WACC is used to evaluate projects, compare investment opportunities, and adjust for different risk levels across business divisions. By the end of the course, you will be able to confidently calculate cost of capital, apply WACC in financial analysis, and support strategic corporate finance decisions.

This module introduces the core concept of cost of capital and explains how companies determine the cost of debt financing. Learners explore key financial principles including required returns, tax effects on borrowing, flotation costs, and bond valuation using market interest rates.

What's included

7 videos4 assignments

7 videosTotal 57 minutes

Introduction to Cost of Capital9 minutes
Cost of Debt10 minutes
Example of Cost of Debt5 minutes
Rate of Return Before Tax Rate8 minutes
Return of After Flotation Cost8 minutes
Current Market Value Bond7 minutes
Current Market Value Bond Continues11 minutes

4 assignmentsTotal 60 minutes

Understanding the Cost of Capital10 minutes
Calculating the Cost of Debt10 minutes
Adjustments in Debt Cost Calculations10 minutes
Foundations of Cost of Capital30 minutes

This module explores equity financing and explains how companies estimate the cost of preferred and common equity. Learners examine the Capital Asset Pricing Model (CAPM), understand systematic risk through beta, and apply financial models to estimate required shareholder returns.

What's included

6 videos4 assignments

6 videosTotal 45 minutes

Cost for Preferred Equity9 minutes
Example of Cost for Preferred Equity9 minutes
Example of Common Cost Stock6 minutes
Capital Assets Pricing Model9 minutes
Capital Assets Pricing Model Example7 minutes
WACC Example5 minutes

4 assignmentsTotal 60 minutes

Preferred Equity Fundamentals10 minutes
Cost of Common Equity10 minutes
CAPM Applications and Practical Calculations10 minutes
Cost of Equity and Market-Based Returns30 minutes

This module focuses on calculating and applying the Weighted Average Cost of Capital (WACC) in real financial decision-making. Learners examine capital structure weighting, tax shields from debt, and the importance of using divisional costs of capital for evaluating projects with different risk profiles.

What's included

7 videos4 assignments

7 videosTotal 61 minutes

WACC Example Continues7 minutes
More on WACC Example4 minutes
Cost of Floating Taxes8 minutes
Rate of Return for Debt11 minutes
Preferred Stock Example8 minutes
Debt and Common Stock12 minutes
Estimate Divisional Costs of Capital11 minutes

4 assignmentsTotal 60 minutes

Building the WACC Calculation10 minutes
Financing Costs and Tax Considerations10 minutes
Capital Structure Decisions and Divisional Costs10 minutes
Weighted Average Cost of Capital in Practice30 minutes

Instructor

EDUCBA

1,186 Courses281,374 learners

Offered by

EDUCBA

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