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3.3 - Coggle Diagram
3.3
WACC
Usfulness
Calculate the cost of capital for an investment
Required rate of return for investment decisions
Calculate 'Value in Use' of non-current assets
Cost of Equity
the Capital Asset Pricing Model
Takes into account the volatility and stability of the investment
Gordon’s Dividend Growth Model
Limited use for smaller firms managed by owners and influenced by their decisions especially regarding the dividends policy
Cost of Debt
Capital
Trade off Theory of capital structure
Gearing, risk, and return
Capital Structure
Debt and Equity
Debt to Equity Ratio D / E
More debt financed
more aggressive capital structure
greater risk
Assessment of investments
Rate of return
Cost of capital