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One of the drawbacks of using only equity to raise capital is that the founders must give up some control of the business.

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Q: What is a drawback of using only equity to raise capital?
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What is debt equity means?

It mens that how much share capital of company is employed by using debt by issuing bonds or other debt instruments and how much portion of share capital employed by using capital from the share holders of company which is called equity capital.


What is the difference between debt capital and equity capital?

A company can raise capital by using the two means - Equity & Debt Equity means ownership. Everyone who owns an equity share of a company owns a part of the company. He/she can influence the decision making in the company Debt represents an obligation. The company is obliged to pay the debt provider interest on a regular basis and repay the principal on the agreed upon date. the loan provider has no say whatsoever in the decision making of the company...


How to calculate capital charge?

To calculate capital charge, you can use the formula: Capital Charge = Cost of Equity × Equity + Cost of Debt × Debt. Cost of equity is usually estimated using the Capital Asset Pricing Model (CAPM) or Dividend Discount Model (DDM), while cost of debt is based on the interest rate on debt. By multiplying the respective cost by the amount of equity and debt, you can determine the capital charge.


A company that wanted to increase its capital through equity financing would most likely get involved in what?

1. A company wants to increase capital using equity financing will involve in issuing share capital to public for subscription.


Is the owner's equity the same as the assets?

No. A Balance Sheet consists of Assets = Liabilities + Owner's Equity. Owner's Equity is increased by profits and contributed capital and is decreased by losses and capital withdrawals. Example of a very simplified Balance Sheet - Assets 150,000 Liabilities 50,000 Owner's Equity 100,000 Total 150,000


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What is equily profit?

Equity profit is the money that a company earns from using external capital in its business operations.


What are the main elements in calculating cost of capital?

The main elements in calculating cost of capital include the cost of debt, cost of equity, and the weight of each component in the capital structure. The cost of debt is typically calculated using the interest rate on outstanding debt, while the cost of equity is often estimated using the Capital Asset Pricing Model (CAPM) or other methods. The weights of debt and equity in the capital structure are based on the market value or book value of each component.


When is WACC an appropriate discount rate when doing capital budgeting?

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What is debt mean?

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Which model is typically used to estimate the cost of using external equity capital?

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