Weighted Average Cost of Capital (WACC)
WACC explained simply for CA Inter May 2026 — formula, weights, post-tax costs, CAPM, worked examples and common exam mistakes covered.
Paper 6 — Financial Management & Strategic Management · Chapter
Cost of Capital
Computation of cost of equity, debt, preference and retained earnings; weighted-average and marginal cost of capital. Highly formula-driven — expect 8–10 marks.
40 microlessons in this chapter
Read each in 5 minutes. Each has worked examples + the bare-Act text for reference.
All lessons
1
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2
Cost of Equity (Dividend, CAPM, Earnings Approach)
Cost of Equity for CA Inter FM: master DGM, CAPM & E/P ratio with worked examples, exam tips & common mistakes for May 2026.
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3
Cost of Debt (Irredeemable & Redeemable)
Cost of Debt (Kd) for CA Inter FM: after-tax formulas for redeemable & irredeemable debentures with solved examples for May 2026 exam.
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4
Cost of Preference Capital
Cost of Preference Capital (Kp) explained for CA Inter FM: irredeemable vs redeemable formulas, no tax adjustment, worked examples, and WACC
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5
Marginal Cost of Capital
Marginal Cost of Capital for CA Inter FM: break points, MCC schedule, and optimal capital budget explained with solved examples for May 2026
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6
Convertible Debentures — Cost Computation
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7
Cost of Debentures (Kd) — irredeemable, redeemable (YTM & approximation), and special cases
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8
Cost of Equity Share Capital (Ke) — Dividend, Earnings, Growth, Realized Yield & CAPM Approaches
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9
Cost of Equity — Capital Asset Pricing Model (CAPM)
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10
Cost of Equity — Dividend Growth Model (Gordon Model)
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11
Cost of Equity — Dividend Price and Earnings Price Approaches
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12
Cost of Equity — Realised Yield Approach
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13
Cost of Equity — Realized Yield Approach
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14
Cost of Existing Debt Using Current Market Price
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15
Cost of Irredeemable (Perpetual) Debentures
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16
Cost of Irredeemable Preference Shares
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17
Cost of Preference Share Capital (Kp)
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18
Cost of Preference Share Capital (Kp) — Irredeemable & Redeemable
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19
Cost of Redeemable Debentures
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20
Cost of Redeemable Preference Shares
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21
Cost of Retained Earnings
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22
Cost of Retained Earnings (Kr)
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23
Deep Discount (Zero Coupon) Bonds
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24
Factors Affecting Cost of Capital and Book Value vs Market Value Weights
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25
Introduction to Cost of Capital and key concepts (issue price, redemption value, flotation cost, tax shield)
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26
Marginal Cost of Capital (MCC)
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27
Marginal Cost of Capital and Breaking Points
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28
Meaning, Significance, Determination, Factors, BV vs MV Weights
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29
Meaning, Significance, and Determination of Cost of Capital
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30
Optimal Capital Structure — Minimising WACC
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31
Optimal Capital Structure, Reverse WACC, and Effect of Gearing
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32
Other Issues in Cost of Debt (Kd) — Amortization, Convertible & Zero Coupon Bonds, Short-term Debt, Bank Loan
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33
Present Value of Amortized Bonds
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34
Risk Classification and Shortcomings under CAPM
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35
Significance of Cost of Capital
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36
WACC — Book Value vs Market Value Weights Comparison
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37
WACC — Full Computation with BV and MV Weights
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38
Weighted Average Cost of Capital (WACC / Ko) and Marginal Cost of Capital (MCC)
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39
Weighted Average Cost of Capital (WACC)
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40
Weighted Average Cost of Capital (WACC) — Fundamentals and Calculation
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