| | Cost of Debt |
| | The cost of debt is calculated using the Present Value interest Factoe of Annuity (PVIF) formula |
| | PVIFA=(1-(1+i)^-t)/i | | where i= rate and t= years |
| | PVIFA=(1-(1+i)^-10)/i |
| | 6.0147727404 |
| | Cost of Debt= | 10.50% |
| | Cost of common stock (Equity) using CAPM |
| | | 3%+1.39(12%-3%)= | 15.51% |
| | Calculating weighted average cost of capital |
| | | Equity and debt | Rate | weight |
| | Genesis debt | $600,000 | 10.50% | 0.3 | 3.15% |
| | Common stock | $1,400,000 | 15.51% | 0.7 | 10.86% |
| | Equity and liabilities | $2,000,000 | | 1 | 14.01% |
| | Weighted average cost of capital =14.01% |
al.fayez
cost_of_equity_and_debt.xlsx
