Question 1 - Part b (i)

In this lesson

1. 0:00 Report structure and professional marks overview
2. 1:22 Cost of capital calculation framework
3. 2:28 Calculating equity value and cost
4. 3:44 Calculating debt value and cost
5. 4:54 WACC calculation and final answer

About this lesson

This is a core technique you'll need for Advanced Financial Management and similar papers, where you're asked to evaluate the impact of financing decisions on different stakeholder groups. The video walks you through a four-step methodology: calculating the value and cost of equity using the capital asset pricing model, determining the value and cost of debt from bond market data, then bringing both together in the WACC formula. You'll see how to extract the right information from the question, set up your calculations clearly in a spreadsheet, and present your work in a way that captures both technical marks and the ten professional marks available for report structure. The key takeaway is working systematically through each element—equity first, then debt—before combining them. The calculations themselves are straightforward if you follow the steps in order. Placing detailed workings in appendices while keeping your report narrative clear is how you'll score well on both the numbers and the presentation.

Duration: 6m