stocks and bonds

Project Description:

in one page, explain the concept of cost of capital. in your own words, how would you determine cost of capital for your business?
• calculating cost of capital (wacc)
you are the financial manager for devon energy. to evaluate an upcoming expansion project, you would like to compute cost of capital for the firm. using market data, please compute cost of capital for your firm. explain the reason and process for computing your firm’s cost of capital.
bonds: click on the following link to determine devon’s before take cost of bond (ytm) in today’s market. use the bond that has the longest maturity
be sure to adjust for tax effect. ytm * (1 – tax rate for devon)
obtain debt ratio value from the same page.

you have decided to use the following financial capm model:
cost of common=risk-free rate + (market return – risk free rate) * beta

beta value can be found on
risk-free rate is 10-year treasury bond rate.
market rate of return is 5-year average of s&p 500 rate of return (please google)

weighted average cost of capital (wacc): compute wacc.
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