The Cost of Capital: Principles and Practice
This technical note, which is based on an earlier note (UVA-F-0910), provides a student primer of firm cost of capital from a conceptual and application perspective. The note provides student intuition on the traditional theory of cost of debt, cost of equity, and weighted-average cost of capital. Moreover, it provides detail on the common approaches to estimating the cost of capital. Specific examples are provided. The note is updated with actual data through 2012.