Select Page

Mechanics of Computation

Mechanics of Computation We now illustrate the mechanics of computation of the weighted average cost of capital. TABLE Weighted Average Cost of Capital (Marginal Weights) This costs substantially lower than the weighted cost calculated using either book values...

Historical Weight

Historical Weight The alternative to the use of marginal weights is to use historical. Here, the relative proportions of various sources to the existing capital structure are used weights. In other words, the basis of the weighting system is the funds already...

Marginal Weight

Marginal Weight The use of marginal weights involves weighting the specific costs by the proportion of each type of fund to the total funds to be raised. The marginal weights represent the percentage share of different financing sources the firm intends to...