Cost Of Capital

Topics:
Strategic Management Tools
Tags:
Economic Value Added,
Economic Value-Added Analysis,
Finance,
Managerial Accounting,
University Of Florida,
WACC
Source:
University of Florida

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Overview: The paper examines the concepts and relevance of computing Weighted Average Cost of Capital (WACC). The feasibility study of a new project is an important activity in the organization. It is imperative to determine whether the new project would be able to generate sufficient cash flows to cover capital costs incurred. WACC is an effective tool in analyzing the same. Economic Value Added (EVA) is the monetary value of an entity at the end of a time period minus the monetary value of that same entity at the beginning of that time period. EVA is a tool that measures how much more valuable a company has become during a given time period. The paper also discusses the role of EVA in WACC analysis.

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Format: HTML | Size: 459KB | Date: Jan 2003 | Pages: 44

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