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  2. Cost of equity - Wikipedia

    en.wikipedia.org/wiki/Cost_of_equity

    Such costs are separated into a firm's cost of debt and cost of equity and attributed to these two kinds of capital sources. A firm's overall cost of capital, which consists of the two types of capital costs, is then determined as the weighted average cost of capital. Knowing a firm's cost of capital is needed in order to make better decisions.

  3. Residual income valuation - Wikipedia

    en.wikipedia.org/wiki/Residual_income_valuation

    The underlying idea is that investors require a rate of return from their resources – i.e. equity – under the control of the firm's management, compensating them for their opportunity cost and accounting for the level of risk resulting. This rate of return is the cost of equity, and a formal equity cost must be subtracted from net income.

  4. Weighted average cost of capital - Wikipedia

    en.wikipedia.org/wiki/Weighted_average_cost_of...

    Cost of new equity should be the adjusted cost for any underwriting fees termed flotation costs (F): K e = D 1 /P 0 (1-F) + g; where F = flotation costs, D 1 is dividends, P 0 is price of the stock, and g is the growth rate. There are 3 ways of calculating K e: Capital Asset Pricing Model; Dividend Discount Method; Bond Yield Plus Risk Premium ...

  5. How do you calculate cost basis on investments? - AOL

    www.aol.com/finance/calculate-cost-basis...

    Methods to calculate cost basis. The cost basis for stocks and mutual funds is generally the price you paid when you purchased the asset, plus any other trading costs. However, there are several ...

  6. Materiality (auditing) - Wikipedia

    en.wikipedia.org/wiki/Materiality_(auditing)

    These methods offer a suggested range for the calculation of materiality. Based on the audit risk, the auditor will select a value inside this range. [15] [failed verification] 0.5% to 1% of gross revenue; 1% to 2% of total assets; 1% to 2% of gross profit; 2% to 5% of shareholders' equity; 5% to 10% of net profit.

  7. Cost of capital - Wikipedia

    en.wikipedia.org/wiki/Cost_of_capital

    To calculate the firm's weighted cost of capital, we must first calculate the costs of the individual financing sources: Cost of Debt, Cost of Preference Capital, and Cost of Equity Cap. Calculation of WACC is an iterative procedure which requires estimation of the fair market value of equity capital [citation needed] if

  8. Discounted cash flow - Wikipedia

    en.wikipedia.org/wiki/Discounted_cash_flow

    However the assumptions used in the appraisal (especially the equity discount rate and the projection of the cash flows to be achieved) are likely to be at least as important as the precise model used. Both the income stream selected and the associated cost of capital model determine the valuation result obtained with each method. (This is one ...

  9. Economic value added - Wikipedia

    en.wikipedia.org/wiki/Economic_Value_Added

    EVA = (r − c) × capital [the spread method, or excess return method] where r = rate of return, and c = cost of capital, or the weighted average cost of capital (WACC). NOPAT is profits derived from a company's operations after cash taxes but before financing costs and non-cash bookkeeping entries.