Financial Management

  1. Cost of Capital
    1. Overview of Cost of Capital
      1. Weighted Average Cost of Capital
        1. Marginal Cost of Capital
          1. Target Capital Structure
            1. Market Value vs. Book Value Weights
            2. Cost of Debt
              1. Before-Tax Cost of Debt
                1. Yield to Maturity Method
                  1. Rating-Based Method
                  2. After-Tax Cost of Debt
                    1. Tax Shield Benefits
                      1. Marginal Tax Rate
                      2. Flotation Costs
                        1. Impact on Cost of Debt
                      3. Cost of Preferred Stock
                        1. Preferred Dividend Method
                          1. Flotation Cost Adjustments
                            1. Callable Preferred Stock
                            2. Cost of Common Equity
                              1. Retained Earnings vs. New Common Stock
                                1. CAPM Approach
                                  1. Risk-Free Rate
                                    1. Market Risk Premium
                                      1. Beta Estimation
                                      2. Dividend Growth Model Approach
                                        1. Constant Growth Assumption
                                          1. Growth Rate Estimation
                                            1. Dividend Yield Plus Growth
                                            2. Bond Yield Plus Risk Premium Approach
                                              1. Risk Premium Estimation
                                              2. Flotation Cost Adjustments
                                                1. Impact on New Equity Cost
                                              3. Weighted Average Cost of Capital Calculation
                                                1. Weight Determination
                                                  1. Market Value Weights
                                                    1. Target Weights
                                                    2. WACC Formula
                                                      1. WACC Applications
                                                      2. Factors Affecting Cost of Capital
                                                        1. Business Risk
                                                          1. Financial Risk
                                                            1. Interest Rate Environment
                                                              1. Market Risk Premium
                                                                1. Firm-Specific Factors
                                                                  1. Credit Rating
                                                                    1. Size
                                                                      1. Profitability
                                                                    2. Divisional and Project Cost of Capital
                                                                      1. Pure Play Method
                                                                        1. Subjective Risk Adjustments
                                                                          1. Project-Specific Beta
                                                                            1. Divisional WACC

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                                                                          7. Capital Budgeting

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                                                                          9. Capital Structure and Leverage