Understanding Cost of capital & Capital structure

Name: Understanding Cost of capital & Capital structure
Rating: 4.3 (20 reviews)

Learn from a real value investor & independent board director, MBA, INSEAD IDP with PE & VC experience

Created byCandi Carrera

Last updated 9/2024

English

What you'll learn

Understanding cost of capital
Understanding difference in cost between equity & debt
Determine your expected return when investing your money
Be able to calculate the cost of capital for a public equity company

Course content

1 section • 7 lectures • 1h 33m total length

Introduction5:08
In this first lecture, I will explain the multi-layered learning method I am using and also walking you through the table of contents of this investor quicktake training on cost of capital
Exchange of money15:29
Understanding why money is being exchanged is fundamental to understand the reasons why there is a cost associated to it. In this lecture, I will explain the exchange of money process and more specifically the premiums that have to be integrated being either the risk premium but also the cost of inflation/cost of living.
The lecture will end by explaining the intermediate role of banks as part of a global system where money is being exchanged every day between lenders & borrowers.
Returns per asset class24:45
A key element in understanding cost of capital is understanding the balance between the expected return closely linked to the asset class and the risk that the asset class carries. In this lecture I will be walking you through each asset class (debt instruments, public equity, private equity & VC) and use external benchmarks to materialize the associated risk (on top of cost inflation) that you can/should expect from those asset classes.
Why equity investments vs debt ?7:26
In this short lecture, I will share my perspective on a question I often get from students and fellow investors "why I prefer to invest into public equity shares vs bonds".
Return on Invested Capital14:00
This lecture will go deeper into how cost of capital & return on invested capital are linked together. We will also discuss capital structure (debt & equity) and from there establish the formula of weighted average cost of capital (WACC).
Practical examples12:17
In this final lecture, we will practice our learnings by determining cost of capital for 4 public equity companies being Microsoft, Apple, Kering & Richemont. After having determined their cost of capital we will compare it to their current return on invested capital (ROIC) to see how they perform against their expected cost of capital.
Conclusion14:12
In this final lecture, I will be summarizing the cost of capital conversation explaining the financial gearing ratio and also explain how to use VingeGPT for retrieving company-specific or industry-specific cost of capital, cost of debt & cost of equity information.

Requirements

Have a basic understanding of how money works
Have a basic understanding of assets, debt & equity in a balance sheet
Understand the difference between bonds & equity

Description

This investor quicktake course will enable you to have an easy & straightforward understanding of cost of capital, why capital has a cost associated to it and how to calculate the cost of capital. You will also understand the risk vs return difference between various asset classes (debt vs equity).

At the end of this quicktake course, students will be able to differentiate the risk between various asset classes and also understand the financial gearing ratio. Furthermore we will practice with Microsoft, Apple, Richemont & Kering and calculate their cost of capital. We will also compare the expected cost of capital with the actual performance on return on invested capital for those 4 companies.

At the end of the course, I will show how to use VingeGPT for retrieving company-specific or industry-specific cost of capital, cost of debt & cost of equity information. Objective of this course is to allow you in a very short period of time (less than 2 hours) to grasp the essence of cost of capital.

Investing in stocks and acting as a business-owner can be a life-changing experience. Learn from my 20 years experience as an investor running my own investment fund and rapidly move ahead faster with the knowledge I will share with you.

Last but not least by subscribing to this course, you will be entitled & invited to our regular Live Webinars where you will be able to ask any kind of question.

Many thanks and I appreciate your interest in this course! Hope you will enjoy it

Candi Carrera

Who this course is for:

Investors analysing financial performance of companies
Investors looking at cost of capital vs Return on Invested Capital
New board directors trying to understand Return on Invested Capital expectations of shareholders