Economic Profit question, total, capital

PieMan

Noplat-$ cost of caital.

Dumb question, how do you find total capital? Assets? Equity? Assets + Depreciation?

F$*%!

defour44

total capital is equity plus debt
think of the wacc formula - it measures the cost of debt and the cost of equity so that's capital

President1988

cost of capital=$WACC

mengxu

also think in common sense, you wanna start a business, what do you use to start it?
borrowed money or investors money

chandsingh

I have only seen it based on beginning value of TA. This is not the same as equity + debt, but let us hope they don't get too picky.

tarunajwani

Thanks all. I understand that completely, but where does the $200,000 from on #34 EOC Q. Reading 29...

redskins44

Thanks Dreary, didn't see that post.

giants2010

Do we use book value or fair value of debt+equity?

I think it's book value?

BelalM

I think you would go with the method the company generally uses but if you're comparing between companies then you would need to adjust to make them comparable but in a simple question the economic profit of a company would just be based on how they recognize their assets.

xilige

yeah this is the part where I hate everything.

Definitely in Corp Finance, Total Capital = Beginning Total Assets,

but I could not guarantee that its the same thing if you are in FRA. bump!