Join Rudolph Rosenberg for an in-depth discussion in this video Companies and the weighted average cost of capital (WACC), part of Making Investment Decisions.
…When evaluating an investment decision, we previously saw that…needs to be compared to the next best investment available.…For companies, there's a multitude of…projects and investments that are potential options.…In some cases, the company needs to choose between two projects.…And in that case, it can use the discount…rate of the other project, to calculate the NPV.…In other cases, the company is just evaluating,…investing into a project versus continuing…to invest into day-to-day business activities.…
For example, a company can choose to cope with increased activity by…doing more of the same, such as adding more cores in a factory.…Or can decide to invest in a new machine…that would increase the productivity of the current workforce.…In that case, companies usually use their WACC as the discount rate.…The WACC is the…Weighted Average Cost of Capital.…This barbaric term, is the name of a…financial metric that can be calculated for each company.…So what does it represent?…To understand WACC, you need to think of your…
This course teaches the net present value (NPV) methodology, an investment evaluation formula used by countless publicly traded companies and financial analysts, in a way that makes it accessible and applicable to you—no finance background required. Rudolph Rosenberg explains what investments are, how they are measured, and what makes a good investment. Then he explores the NPV formula in depth, showing you how to evaluate your cash flows, choose a rate of return, and assess the risk of a particular investment. This all culminates in a look at how the principles of investment apply to three real-life scenarios that any individual or company might encounter.
- What is an investment?
- Understanding ROI
- What makes a good investment?
- Using the NPV formula
- Assessing risk
- Applying NPV to real-life situations