What does the capital cost rate mean? What are the types of capital cost rate?

The concept of capital cost rate The capital cost rate refers to the ratio between the company's expenses and the amount of funds effectively raised, usually expressed as a percentage. In the practice of enterprise financing, the relative number of capital cost is usually adopted, that is, the capital cost rate. Types of capital cost rate Generally speaking, there are the following types of capital cost rate: 1. Individual capital cost rate Individual capital cost rate refers to the cost rate of various long-term capital of the company. For example, stock capital cost ratio, bond capital cost ratio and long-term borrowing capital cost ratio. Companies need to use individual capital cost ratio when comparing various financing methods. 2. The comprehensive cost rate of capital refers to the cost rate of all long-term capital of a company. Usually, the individual cost rate of capital is weighted by the proportion of various long-term capital, so it is also called the weighted average cost rate of capital. Therefore, the comprehensive capital cost rate is determined by two factors: the single capital cost rate and the long-term bond capital cost rate. Calculation of capital cost rate 1. Individual capital cost rate: it is the ratio of the cost of a certain financing to the net financing. The calculation formula is: k = d/(p-f)k = d/p( 1-f)k- capital cost rate, and d- expenses are expressed as a percentage. That is, the ratio of financing expense to financing amount f-financing expense amount The single capital cost rate depends on three factors: tariff, financing expense and financing amount (1) Calculation of long-term debt capital cost rate ① Calculation of long-term loan capital cost rate KL- long-term loan capital cost rate IL- long-term loan annual interest rate L- long-term loan financing amount FL- long-term loan financing expense rate T- enterprise income tax rate. When the financing cost of enterprise loans can rarely be ignored, the formula can be written as Kl=Rl_ 1-T_ Rl, indicating the loan interest rate. ② The calculation of the capital cost rate of long-term bonds indicates the issuance cost, including the application fee, registration fee, printing fee and listing fee. Regardless of time value, KB-bond capital cost rate B-bond financing amount, FB- bond financing cost rate I B- interest paid by bonds every year (2) calculation of equity capital cost rate ① calculation of common equity capital cost rate. There are two ways: one is dividend discount model: P0 = P0- net financing of common stock dt- T-year dividend KC of common stock-necessary return rate of common stock equity investment, that is, the cost rate of common stock equity capital. If the company adopts a fixed dividend policy, that is, a cash dividend of D yuan is distributed every year, and if the company adopts a fixed dividend growth policy with a dividend growth rate of G, the cost of capital ratio is calculated as follows. Kc=+GD 1 indicates the dividend in the first year, and the second is the capital asset pricing model, that is, the cost of stock is the necessary rate of return of common stock investment, and the necessary rate of return of common stock investment is equal to the risk-free rate of return plus the risk rate of return. The formula is: KC = RF+β(RM-RF)RF- risk-free rate of return RM- market average rate of return β-risk coefficient ② Calculation of preferred stock capital cost rate KP = KP- preferred stock capital cost rate D-preferred stock annual dividend P0- preferred stock net financing ③ Calculation of retained profit capital cost rate. The after-tax profit of the company forms the company's retained profit (or retained earnings), which belongs to equity capital. 2. Calculation of comprehensive cost rate of capital ① Factors that determine comprehensive cost rate of capital. Refers to the cost rate of all long-term capital of an enterprise, and usually takes the proportion of various long-term capital as the weight, and calculates the cost rate of individual capital by weighted average method. The comprehensive cost rate of an enterprise is determined by the individual capital cost and capital structure. (2) The calculation method of comprehensive capital cost rate is Kw= (where: Kw- comprehensive capital cost rate KJ-J capital cost rate wj-j capital ratio.