Cost of Capital
Shareholders and investors who invest into the capital of the firm desire to have a suitable return on their investment funding. The cost of capital reflects what shareholders expect. It is a discount rate for converting expected cash flow into present cash flow.
Capital Structure
Capital structure is the combination of debt and equity employed by an organization in order to take care of its operations. It is an important concept in corporate finance and is expressed in the form of a debt-equity ratio.
Weighted Average Cost of Capital
The Weighted Average Cost of Capital is a tool used for calculating the cost of capital for a firm wherein proportional weightage is assigned to each category of capital. It can also be defined as the average amount that a firm needs to pay its stakeholders and for its security to finance the assets. The most commonly used sources of capital include common stocks, bonds, long-term debts, etc. The increase in weighted average cost of capital is an indicator of a decrease in the valuation of a firm and an increase in its risk.
What is project financing?
Project financing is an opportunity to finance long-term, nil, or restricted capital accessible to a borrower in relation to the proposal's rights, assets, and interests. Project financing may be the response you are searching for if you are planning to start a venture of construction, infrastructure, or public service, and need funding for it.
The refund can be made with the cash flow formed when the project is finished rather than sponsors' balance sheets. The lender shall assume control over the venture if the borrower refuses to comply with the terms of the loan. Financial businesses will achieve better profits if they use the scheme if the related project risks are partially moved. Thus, promoters, businesses, and lenders alike prefer this form of the credit system.
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