We spoke about the cost of capital both in theory and practice. Assume that a company has the
following four parts in its capital structure: common stock, preferred stock, long-term bonds, and a bank
loan.
a) Explain in theory how to calculate this company's cost of capital.
b) What real-world factors might you also want to consider in calculating its cost of capital?
Specifically, reflect on the low interest rate environment over the last decade (2010-2020).

Answer rating: 100% (QA)

a In theory to calculate a companys cost of capital one must consider the weighted average cost of a... View the full answer