 |  Fundamentals of Corporate Finance, 4/e Stephen A. Ross,
Massachusetts Institute of Technology
Randolph W. Westerfield,
University of Southern California
Bradford D. Jordan,
University of Kentucky
Gordon S. Roberts,
York University
Cost of Capital
Key TermsBelow are the key terms featured in this chapter. Clicking on a term will reveal its definition. The textbook's full glossary is also available for online searching.
| Adjusted Present Value (APV) | Base case net present value of a project's operating cash flows plus present value of any financing benefits.
(See Refer to page 487)
| | | | | Cost of Debt | The return that lenders require on the firm's debt.
(See Refer to page 464)
| | | | | Cost of Equity | The return that equity investors require on their investment in the firm.
(See Refer to page 458)
| | | | | Economic Value Added (EVA) | Performance measure based on WACC.
(See Refer to page 470)
| | | | | Pure Play Approach | Use of a WACC that is unique to a particular project.
(See Refer to page 472)
| | | | | Retention Ratio | Retained earnings divided by net income. Also called the plowback ratio.
(See Refer to page 104, 460)
| | | | | Return on Equity (ROE) | Net income after interest and taxes divided by average common shareholders' equity.
(See Refer to page 460)
| | | | | Weighted Average Cost of Capital (WACC) | The weighted average of the costs of debt and equity.
(See Refer to page 466)
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2002 McGraw-Hill Higher Education