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- 2011-7-11
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3#
发表于 2011-7-11 15:11
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Weighted average cost of capital is the cost based on the current capital structure. If the question asks for what WACC will be after additional capital is raised, it will include the additional capital.
Marginal cost of capital is the cost of the increased capital (does not include the current capital cost).
Best way to explain is by example:
Company has $10,000,000 in long-term debt, and $10,000,000 in common equity outstanding. Cost of Equity = 20%. After-tax cost of debt = 10%.
WACC = .5*(20%) + .5*(10%) = 15%
Let's say company needs to raise $20,000,000 more of capital and wants to keep the same capital structure (50/50). However, the cost of the new debt will be 15%. The cost of the new equity will still be 20%.
Marginal Cost of Capital = .5*(20%) + .5*(15%) = 17.5%
WACC after raiding new capital = .5*(20%) + .25*(10%) + .25*(15%) = 16.25% |
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