Write on the following:

Explain the concepts underlying the firm's cost of capital. Evaluate the costs of the individual sources of capital. Calculate a firm's weighted average cost of capital. Estimate divisional cost of capital.

The Cost of Capital Earlier, we considered the valuation of debt and equity instruments. The concepts advanced serve as a foundation for determining the required rate of return for a firm and for specific investment projects. The objective in this chapter is to determine the required rate of return when evaluating investment projects.