Equity / Cost of Capital Flashcards
1
Q
Operating Leverage (DOL)
A
% Change in EBIT / % change in sales volume
2
Q
Financial Leverage (DFL)
A
% change in earnings per share / % change in EBIT
3
Q
Cost of Debt(bonds)
A
yield x (1-effective tax rate)
4
Q
Cost of preferred stock
A
div / net issue price
5
Q
Cost of Existing Common Stock (CAPM capital asset pricing method)
A
Risk free rate - ((expected mkt rate - risk free rate) * beta))
6
Q
Div yield plus growth rate
A
(next expected div/ current stock price) + expected growth in earnings
7
Q
Cost of New Common Stock
A
(next expected div/ (current stock price - flotation costs)) + expected growth in earning
8
Q
weighted avg cost of capital (WACC)
A
