标题: Corporate Finance - Cost of Capital - Break Points [打印本页] 作者: wildrose 时间: 2011-7-13 13:32 标题: Corporate Finance - Cost of Capital - Break Points
Hi,
Break point = (amount of capital at which the compnents's cost of capital changes) /
(weight of the component in the capital structure)
Why is the amount of capital divided by the weight of the component in the cap structure?作者: leadcfa 时间: 2011-7-13 13:32
breakpoint was explained very poorly in the CFAI text, but much better in schwesser notes. Check it out.作者: JGovender 时间: 2011-7-13 13:32
I am looking at Schweser but don't understand the logic of this...作者: draz 时间: 2011-7-13 13:32
If you capital structure is 40% debt and 60% equity, and for example you have say 5 million debt and 10 million equity available then,
your first breakpoint for debt will occur at
5/40% = 5/0.40= 11.25 million dollars
and first breakpoint for equity will occur at 10/0.6 = 16.67作者: pacmandefense 时间: 2011-7-13 13:32
Thanks razedge.
But, I don't understand the logic of the equation;
Break point = (amount of capital at which the compnents's cost of capital changes) /
(weight of the component in the capital structure)
Why does this constitute a break point?作者: bapswarrior 时间: 2011-7-13 13:32
oops - disregard everything in my last post after "An identical logic holds for the equity breakpoint." I forgot to check my work.
AJ: I believe you have a math error - 5/0.40 is 12.5, not 11.25 (speaking as one who also made an error)作者: Matori 时间: 2011-7-13 13:32
Oops i did not check the calculations, i assumed 5/0.4=11.25.Anyways...
do you agree with the explaination as that's what matters...作者: ishfaque 时间: 2011-7-13 13:32
