1 cost of capital

Meeting Point 1

Khairunnisa for Telkom University


INVESTOR PERUSAHAANBISNIS


SalesRevenues

Operating Cost and

Taxes

Required Investment

in Operations

FinancingDecisions

Interest Rates

Firm and Market

Risk

Free Cash FlowsWeighted Average Cost

of Capital (WACC)

Taxes if you raised fund from debt

Any transaction cost incurred when a firm raises funds by issuing a particular type of security called floatation cost


Business Risk

The risk to the firm of being unable o cover operating costs is assumed to be unchanged

Financial Risk

The risk to the firm of being unable to cover required financial obligations is assumed to be unchanged

After tax costs are considered relevant


Focusing on Debt

Preferred Stock

Common Stock

Retained Earnings



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Perusahaan menerbitkan obligasi yang membayar bunga 10%, nilai nominal obligasi tersebut sebesar Rp 1.000.-. Obligasi akan jatuh tempo dalam waktu 5 tahun. Obligasi tersebut terjual dengan harga Rp 1.000,-. Berapa biaya hutang dari penerbitan obligasi tersebut?



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Belton is issuing a $ 1,000 par value that pays 7 percent annual interest and matures in 15 years. Investors are willing to pay $ 958 for the bond. The company is an 18 percent tax bracket. What will be the firm’s after-tax cost of debt on the bond?



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The preferred stock of Walter Industries sells for $ 36 and pays $ 2.50 in dividends. The net price of the security after issuance costs is $ 32.50. What is the cost of capital for the prefereed stock?


Two respect for calculating common equity The cost of common equity is more difficult to estimate

because the stock owners are the residual owners of the firm

Common equity can be obtained from either the retention of firm earnings or through the sale of new shares


Using Gordon Model


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Ross Textile wishes to measure its cost of common equity. The firm’s stock currently selling for $ 57.50. The firm expects to pay a $ 3.40 dividend at the end of the year (2010). The dividends for the past 5 years are shown in the following table.


Year Dividend

2009 $ 3.10

2008 2.92

2007 2.60

2006 2.30

2005 2.12

After underpricing and floatation costs, the firm expects to net $ 52 per share on a new issue.a. Determine the growth rate of dividends

b. Determine the net proceeds

c. Using the constants-growth valuation model, determine the cost of retained earnings

d. Using the constants-growth valuation model, determine the cost of new stock


To determine the overall cost of capital that reflects the expected average futre cost of funds over the long run


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The capital structure for the Bias Corporation follows. The company plans to maintain its debt structure in the future. If the firm has a 6 percent after-tax cost of debt, a 13.5 percent cost of preferred stock, and a 19 percent cost of common stock, what is the firm’s weighted cost of capital?


Bonds $ 1,100

Preferred Stock 250

Common Stock 3,700

Capital Structure ($ 000)

Cost of capital is IMPORTANT to EVERY firm and most PUBLICLY TRADED firm

Financial manager uses it to make investment decisions and to determine incentive compensation


PT Rakers memiliki struktur modal sebagai berikut (dipertimbangkan sudah optimal)


Hutang 25%

Saham Preferen 15%

Saham Biasa 60%

Total 100%

Perusahaan ini mengharapkan keuntungan bersih Rp 17.142.860,- tahun ini. Dividend Pay Out Ratio adalah 30 %, pajak 40 % dan investor mengharapkan pendapatan dan dividen bertumbuh 9 % di masa mendatang. Tahun lalu , perusahaan membayar dividen (D0) sebesar Rp 3.600,- per lembar saham dan sahamnya saat ini terjual dengan harga Rp 60.000,-per lembar. Suku bunga bebas risiko adalah 11 % dan suatu saham rata-rata memberikan rate of return yang diharapkan sebesar 14 %. Beta saham lama adalah 1,51. Persyaratan ini berlaku untuk penawaran sekuritas lama:


Saham biasa : Saham baru memiliki floatation cost sebesar 10 %

Saham preferen : Saham preferen dapat dijual ke publik dengan harga Rp 100.000 per lembar, dengan dividen Rp 11.000,- Floatation cost adalah sebesar Rp 5000,- per lembar

Hutang dapat dijual dengan membayar bunga sebesar 12 %


Komponen biaya hutang, biaya saham preferen, biaya laba yang ditahan dan saham biasa baru

Berapa modal baru yang dapat diperoleh sebelum PT Rakers harus menjual modal sendiri baru (new equity)

Berapa Weighted Average Cost of Capital ketika PT Rakers memenuhi kebutuhan akan modal sendiri dengan laba yang ditahan serta ketika akan menerbitkan saham baru


Economy & Finance

1 cost of capital