The cost of capital is the expression used in finance for the cost of a company's funds (primarily debt and equity) or, from an investor's point of view, the required rate of return on a company's securities. It is the fundamental discount rate used in a discounted cash flow analysis to evaluate investment projects of a company since it is the minimum return that investors expect for providing capital to a company, thus setting a return benchmark that a project should meet. 

This course:

  • Reviews alternative approaches to estimating the cost of capital, focusing on the Capital Asset Pricing Model (CAPM) and weighted average cost of capital (WACC) calculation.
  • Describes common proxies for the risk-free rate and market return.
  • Discusses alternative ways to estimate a project’s beta and how to adjust for the amount of leverage used.
  • Details how to estimate the cost of debt.
  • Introduces advanced multi-factor versions of the CAPM.
Learning Objectives
  • Review the components that make up a company’s cost of capital.
  • Establish alternative approaches and best practices for estimating the different parameters.
  • Improve your ability to develop a more accurate cost of capital discount rate for your investment project evaluations.
Last updated/reviewed: March 21, 2024
53 Reviews (159 ratings)

Reviews

5
Member's Profile
Nice high level overview of everything cost of capital related: WACC, CAPM, GG, SML, FFC. All of the acronyms are here, but most importantly the presenter knows his stuff and presents clearly. Either as an introduction to the topic or as a refresher, this is an hour well spent.
4
Anonymous Author
The course was really good to reinforce my basics for Cost of Capital and at some point gave I would expect to have examples more related to the market where I'am devloping my carrer that is ver dynamic and probably the measure of the variables is also complex to identify.
5
Member's Profile
This is a course to take if: -You need a refresher on putting together a WACC -You would like an *easier* way to get there. -You're a skilled Finance pro. This has most of the meat of several weeks of study. It is worth reviewing over time, as it is dense and useful.
4
Member's Profile
It break down the relevent formulas and inputs. The instructor is clear but not engaging. Audio should be higher quality. The 2nd question on the review questions appears to have the wrong answer associated per the notes to the answer.
5
Member's Profile
The presenter was effective and had the required knowledge for this course. I am currently with a start-up company and this course provided the useful information needed to calculate our estimated cost of capital
3
Member's Profile
Overall was a decent course but more technical than what I needed. I thought it would be more for determining the value of projects to execute at my employer but seemed to get a little more esoteric.
3
Member's Profile
I understand this calculation better after the course, but I still find the matter difficult to fully comprehend (it is a difficult subject). It is a difficult subject to address in a one hour course.
5
Anonymous Author
Very informative refresher on these concepts and appreciate that instructor points to good sources of information for getting proxies to use in estimates, especially for private companies.
3
Anonymous Author
I do not think I have seen a course with this many formulas since I was in college. However Jake did a good job explaining each part of the formula so that they were understandable.
3
Anonymous Author
Would have liked definitions of the terms at the start of the class. Definitely not for beginners. A reasonable review if you've covered the material previously.
5
Member's Profile
I really liked this course and thought the instructor went into great detail on how to find the cost of capital. The slides and glossary helped me learn.
5
Member's Profile
I really enjoyed the easy to follow format where the audio matched the slides, the formulas were explained in an understandable manner.
5
Member's Profile
Great, course Jake. Really enjoyed how you broke down estimating the cost of capital. You spoke clearly and articulated yourself.
4
Member's Profile
Slides presented and explained well, however some quiz answers were difficult to determine from the presentation content
4
Anonymous Author
Great breakdown of how to estimate COC. Very helpful for understanding where each calculation comes from.
5
Anonymous Author
Truly a difficult topic but nicely explained and well presented. Presentation is easily understandable.
4
Member's Profile
It was a good way to learn this subject and I would reccommend this course to a finance college student.
5
Anonymous Author
I enjoyed taking this course. It taught me the structure and importance of estimating cost of capital.
4
Member's Profile
Good review of the CAPM. Could probably have provided more information of the other pricing models
4
Member's Profile
Powerpoint was good, thought some of the quiz and exam questions were misleading and confusing
4
Member's Profile
Enjoyed this course, I was a little rusty on the subject matter and this was a good refresher.
4
Anonymous Author
This is a great review of some complicated valuations for investment decisions for companies.
5
Member's Profile
A good overview of the fundamentals of capital cost, packed into not much time.
5
Member's Profile
Excellent update of current use of WACC in today's capital market analysis.
4
Member's Profile
Good overview and more examples with numbers might assist in understanding
5
Anonymous Author
Very comprehensive course that is well presented at a very fast pace
4
Member's Profile
Such a complex topic but covered well using various pricing models.
5
Member's Profile
This is good course. I recommend to everybody to take this course.
5
Member's Profile
I thought learning about forecasting beta was interesting.
5
Member's Profile
Easy to follow and understand, great course overall.
5
Anonymous Author
Good overview of elements of financial management
4
Member's Profile
It's useful to understand the CAPM model.
4
Anonymous Author
difficult subject matter but informative
5
Member's Profile
Easy to follow on a complex topic!
3
Anonymous Author
Great material for calculations.
5
Anonymous Author
This course was very interesting
5
Anonymous Author
Good review of key concepts.
4
Anonymous Author
The slides were informative.
4
Member's Profile
Thorough, accurate course.
5
Member's Profile
I liked the power point
4
Anonymous Author
not the clearest slides
5
Member's Profile
Helpful information!
5
Member's Profile
Easy to follow.
5
Member's Profile
Excellent Course
4
Anonymous Author
Good refresher
4
Member's Profile
Good overview
5
Member's Profile
Great lesson!
5
Anonymous Author
Great Course
Member's Profile
Interesting
5
Anonymous Author
Very good.
5
Member's Profile
liked
4
Anonymous Author
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5
Member's Profile
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Prerequisites
Course Complexity: Advanced

Prerequisite: Previous experience in finance

 

Advanced Preparation: None

 

Education Provider Information
Company: Illumeo, Inc., 75 East Santa Clara St., Suite 1215, San Jose, CA 95113
Contact: For more information regarding this course, including complaint and cancellation policies, please contact our offices at (408) 400- 3993 or send an e-mail to .
Instructor for this course
  Course Overview CPE
Course Syllabus
INTRODUCTION AND OVERVIEW
  6:19PREVIEW: Introduction to Estimating the Cost of Capital
Estimating the COC
  WACC Method, CAPM, Beta and Market Risk8:59
  Linear Regression, Forecasting Beta, Unlevered and Project-Based COC13:50
  Beyond CAPM, Multifactor Models of Risk, and FFC 11:55
ADDITIONAL METHODS
  Other Approaches and Sources for Estimating the COC 5:54
SUPPORTING MATERIALS
  Slides: Estimating the Cost of CapitalPDF
  Estimating the Cost of Capital Glossary/IndexPDF
REVIEW & TEST
  REVIEW QUESTIONSquiz
 FINAL EXAMexam