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Calculation of AverageWeighted Cost of Capital for Individual Shares of Sarajevo and Banja Luka Stock Exchange

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Author Info

  • Almir Alihodžic

    (University of Zenica, Bosnia and Herzegovina)

  • Dejan Eric

    (Institute of Economic Sciences, Serbia)

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    Abstract

    The cost of capital is a discount rate, based on which discounted cash flow factor and residual value are determined. The cost of capital in literature is often found by the name of cost of capital or the opportunity cost of capital, which should provide a rate of return on capital that would be formed from an alternative investment capital. In order to achieve this, the cost of capital also includes a risk to achieve the rate of return. The Weighted Average Cost of Capital - WACC represents the average rate of return that a company must pay to shareholders and creditors. Most often, it is an adjusted discount rate, suitable for the risk of cash flows of companies. The cost of capital depends on the risk of cash flow businesses. In addition, the company is financed by borrowing or lending of funds, whether from banks, individuals or other sources. This paper explores the possibility to calculate weighted average cost of capital for individual shares within the share market indexes of SASX – 30 and BIRS.

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    Bibliographic Info

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    This chapter was published in: Almir Alihodžic & Dejan Eric , , pages 1303-1312, 2013.

    This item is provided by ToKnowPress in its series Active Citizenship by Knowledge Management & Innovation: Proceedings of the Management, Knowledge and Learning International Conference 2013 with number 1303-1312.

    Handle: RePEc:tkp:mklp13:1303-1312

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    Web page: http://www.toknowpress.net/proceedings/978-961-6914-02-4/

    Related research

    Keywords: cost of capital; risk premium; beta coefficient; shares indices;

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