Essentials of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)

9th Edition

ISBN: 9781259277214

Author: Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Bradford D Jordan Professor

Publisher: McGraw-Hill Education

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Concept explainers

Cost of Capital

Shareholders and investors who invest into the capital of the firm desire to have a suitable return on their investment funding. The cost of capital reflects what shareholders expect. It is a discount rate for converting expected cash flow into present c…

Capital Structure

Capital structure is the combination of debt and equity employed by an organization in order to take care of its operations. It is an important concept in corporate finance and is expressed in the form of a debt-equity ratio.

Weighted Average Cost of Capital

The Weighted Average Cost of Capital is a tool used for calculating the cost of capital for a firm wherein proportional weightage is assigned to each category of capital. It can also be defined as the average amount that a firm needs to pay its stakehold…

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Textbook Question

Chapter 12.1, Problem 12.1ACQ

What is the primary determinant of the cost of capital for an investment?

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Chapter 11, Problem 2CC

Chapter 12.1, Problem 12.1BCQ

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Chapter 12 Solutions

Essentials of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)

Ch. 12.1 - What is the primary determinant of the cost of...Ch. 12.1 - What is the relationship between the required...Ch. 12.2 - Prob. 12.2ACQ Ch. 12.2 - Prob. 12.2BCQ Ch. 12.3 - Prob. 12.3ACQ Ch. 12.3 - Prob. 12.3BCQ Ch. 12.3 - Prob. 12.3CCQ Ch. 12.4 - Prob. 12.4ACQ Ch. 12.4 - Why do we multiply the cost of debt by (1 TC)...Ch. 12.4 - Under what conditions is it correct to use the...

Ch. 12.5 - Prob. 12.5ACQ Ch. 12.5 - Prob. 12.5BCQ Ch. 12.6 - Prob. 12.6ACQ Ch. 12.6 - Prob. 12.6BCQ Ch. 12 - Section 12.1What are the components used to...Ch. 12 - Prob. 12.2C Ch. 12 - Prob. 12.3C Ch. 12 - Prob. 12.4C Ch. 12 - Section 12.5True or False: Projects should always...Ch. 12 - WACC. On the most basic level, if a firms WACC is...Ch. 12 - Prob. 2CTCR Ch. 12 - Project Risk. If you can borrow all the money you...Ch. 12 - LO4 12.4WACC and Taxes. Why do we use an aftertax...Ch. 12 - DGM Cost of Equity Estimation. What are the...Ch. 12 - Prob. 6CTCR Ch. 12 - Prob. 7CTCR Ch. 12 - Prob. 8CTCR Ch. 12 - Prob. 9CTCR Ch. 12 - Prob. 10CTCR Ch. 12 - Prob. 1QP Ch. 12 - Calculating Cost of Equity. Halestorm Corporations...Ch. 12 - Calculating Cost of Equity. Stock in CDB...Ch. 12 - Estimating the DCF Growth Rate. Suppose Hornsby...Ch. 12 - Prob. 5QP Ch. 12 - LO2 6Calculating Cost of Debt. ICU Window, Inc.,...Ch. 12 - LO2 7Calculating Cost of Debt. Jimmys Cricket Farm...Ch. 12 - Calculating Cost of Debt. For the firm in Problem...Ch. 12 - Calculating WACC. Bargeron Corporation has a...Ch. 12 - Prob. 10QP Ch. 12 - Prob. 11QP Ch. 12 - Book Value versus Market Value. Bonaime, Inc., has...Ch. 12 - Calculating the WACC. In Problem 12, suppose the...Ch. 12 - WACC. Clifford, Inc., has a target debtequity...Ch. 12 - Prob. 15QP Ch. 12 - Finding the WACC. Hankins Corporation has 5.4...Ch. 12 - SML and WACC. An all-equity firm is considering...Ch. 12 - Calculating the WACC. You are given the following...Ch. 12 - Calculating Capital Structure Weights. Liu...Ch. 12 - Calculating the WACC. Gnomes R Us is considering a...Ch. 12 - Prob. 21QP Ch. 12 - Calculating the Cost of Debt. Ying Import has...Ch. 12 - Prob. 23QP Ch. 12 - Adjusted Cash Flow from Assets. Ward Corp. is...Ch. 12 - Adjusted Cash Flow from Assets. In the previous...Ch. 12 - Prob. 26QP Ch. 12 - WACC and NPV. Photochronograph Corporation (PC)...Ch. 12 - Project Evaluation. This is a comprehensive...Ch. 12 - Prob. 1CC Ch. 12 - Cost of Capital for Layton Motors You have...Ch. 12 - Prob. 3CC Ch. 12 - Prob. 4CC Ch. 12 - Prob. 5CC

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What is the primary determinant of the cost of capital for an investment?

Solution Summary: The author explains that the primary factor that determines the cost of capital is the way in which the company utilizes funds or capital.

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Chapter 12 Solutions