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169。The McGrawHill Companies, Inc.,2023 11 1 Irwin/McGrawHill Chapter 11 Fundamentals of Corporate Finance Third Edition The Cost of Capital Brealey Myers Marcus slides by Matthew Will 169。The McGrawHill Companies, Inc.,2023 11 2 Irwin/McGrawHill Topics Covered ?Geothermal’s Cost of Capital ?Weighted Average Cost of Capital (WACC) ?Capital Structure ?Required Rates of Return ?Big Oil’s WACC ?Interpreting WACC ?Flotation Costs 169。The McGrawHill Companies, Inc.,2023 11 3 Irwin/McGrawHill Cost of Capital Cost of Capital The return the firm’s investors could expect to earn if they invested in securities with parable degrees of risk. Capital Structure The firm’s mix of long term financing and equity financing. 169。The McGrawHill Companies, Inc.,2023 11 4 Irwin/McGrawHill Cost of Capital Example Geothermal Inc. has the following structure. Given that geothermal pays 8% for debt and 14% for equity, what is the Company Cost of Capital? 169。The McGrawHill Companies, Inc.,2023 11 5 Irwin/McGrawHill Cost of Capital Example Geothermal Inc. has the following structure. Given that geothermal pays 8% for debt and 14% for equity, what is the Company Cost of Capital? 100 %$64 7Assets ValueMarket 70%$45 3 Equit yValueMarket 30%$19 4 DebtValueMarket 169。The McGrawHill Companies, Inc.,2023 11 6 Irwin/McGrawHill Cost of Capital Example Geothermal Inc.