• Understand the basic assumptions, relationships, concepts and specific sources of capital underlying the cost of capital
• Determine the cost of long-term debt using calculations and an approximation (short-cut)
technique
• Compute the cost of preference shares
• Calculate the cost of equity shares using (i) dividend valuation approach and (ii) capital asset pricing model (CAPM) approach and convert it into cost of retained earnings
• Find the weighted average/overall cost of capital and discuss the alternative weighting schemes—historical (book values as well as market values) and marginal
• Outline cost of capital practices followed by corporates in India
