A reference study to rooting the cost of capital

Document Type : Research article

Authors

1 Assistant teacher at the Accounting Department - Higher Madina Institute for Management and Technology PhD researcher accounting and financing - Faculty of Commerce, Cairo University, Egypt

2 Professor of costs and managerial accounting Faculty of commerce, Cairo University, Egypt

Abstract

The purpose of this research is to investigate and analysis the term or variable of cost of
capital, both equity and debt, as well as models for measuring each of them and a model for
calculating the weighted average cost of capital, according to accounting and finance studies. The
researcher also attempted to theoretically root the variable by examining the most prevalent equity
capital cost models in particular. The researcher employed the descriptive analytical method. The
study's most notable findings were as follows: There is only one model for the cost of equity capital,
but there are studies that add the interest rate from the Central Bank website for each year, and studies
that stick to the text of the equation in the article that produced the model, an article (Gray et al, 2009).
To calculate the total, divide the interest by the average of the short and long-term loans. There are
several models for calculating the cost of capital debt; some are appropriate for use in Egypt, while
others cannot be used due to a lack of data. The study discovered that the (Omran & Pointon, 2005)
model is the most common model for the deployment of owned capital in the Egyptian context.
Finally, the most important findings revealed that there is no contradiction with the weighted average
cost of capital model, which is divided into two parts: loan capital, which is calculated with or without
interest, and equity capital, which is calculated using one of the equity capital models. The results of
one study may differ from another depending on the models used

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