Anyone good with finance? I need some help!

[shelleyd2008]

This is for school. I've already done the assignment, but I mainly reworded what I found online and in the text. I just can't wrap my brain around "Cost of Capital" and "Weighted Average Cost of Capital". First off, most everything I found was directed at WACC, though I assume they are different? What's the difference? Anything you can do to help me understand what these are will be helpful, I just can't grasp these ideas.

 

[maple]

Sticks and stone can break my bones but icky words make me stand there with a dull expressionless look on my face.

 

[debilorrah]

I am assuming you are paying for this class which means your teacher should be TEACHING you what the differences are. I will cut off my rant there.

Ken finally got a math teacher that actually taught him how to do the work!!!!

 

[debilorrah]

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[justbugged]

I would think that the Cost of Capital is the cost of the loan needed to get a business started or to keep it going.

Beyond that I am lost and I agree that the teacher is more than responsible to explain the term, or the person posing as the teacher shouldn't ask such questions.

 

[shelleyd2008]

Well, this is college, bachelor level, so I guess we are technically supposed to be able to 'learn' on our own. I've not had many teachers actually 'teach' in my time with college courses.

 

[WingingIt]

It's been a really long time, but I *think* the cost of capital is rate of return an investor expects to get in return for investing in that project/operation/investment.

The weighted average cost of capital is similar in that it results in the rate of return that's expected to be received for investing, but it's calculated differently. It's calculated by giving some aspects of the investment more 'weight' than others. IE: Investors typically expect stocks to return a higher rate than bonds, so if you are figuring out what a rate of return is for a package that contains stocks AND bonds.....you have to take into account what % of the package is made up of stocks (x whatever the expected rate of return is for them) versus what percentage is bonds (and multiply that by IT'S expected rate of return). Then you combine those two ('weighted') results as your answer.

Sort of hard to type out, but hopefully that helps a tiny bit.

 

[FarmerJamie]

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