Estimation of Weighted Average Cost of Capital Essay

attachment of Weighted Average Cost of detonator - Essay ExampleThe paper also discusses the various cast off rating techniques like Net Present Value Method, Internal Rate of Return, and so on. The paper takes a quantitative approach for the explanation of various concepts in Capital Structure and Project Evaluation Techniques/Capital Budgeting Techniques.Cost of capital is an important phenomenon in determining the overall/weighted average cost of capital. In fact, the financial risk is judged by investors and other stakeholders in line with cost of capital and nature of capital structure. The overall cost of capital can be reduced and value of the firm can be improved by maximizing the debt content in the capital structure. But, as debt content goes on increasing, rectitude investors expectations about risk will also change. Investors feel risk in investment with highly levered firms and evil versa. Capital structure theories postulate the various possibilities of capital s tructure. It does not speak about which approach is most beneficial to companies in various situations. Capital structure is not a static phenomenon. It keeps on ever-changing with every change in the mix of various sources of capital/fund. The profitability of a business proffer/ project can be evaluated in various ways using both discounted and non-discounted project evaluation methods.