Cost Of Capital Case Study Pdf

1 The Groupe de Contact (1999). C project selection is sometimes governed by a “profitability index”, i. It becomes a corporate asset. 3 By maintaining this consistency, they have been able to drive cost-cutting efforts and provide superior service. Besides, answers to this question are particularly important for Ukraine, where corporate governance is quite weak (World Bank, 2006; Foo and Witkowska, 2011) and interest rates are high. 2 Calculation of Capital Recovery and AW Values 153 6. Borrowers may negotiate restrictions on this unilateral right limiting variations to price. Loan Performance (a case study of NIB International Bank Share Company) Supervisor: Alem Hagos (PhD) Tegegn Bogale Araya. illustrative case studies. : Cost of Capital FIN202a-Spring 2011 1. This research concludes about the. capital structure or combination of debt and equity that you expect to maintain over a number of years. 5% in year six. Present Value and Other Cost Adjustments Applying Cost of Capital Adjustment to Ongoing Capital Expense per MWh LCOE-E Form 1 Sample Size Capital Reinvestment and Operations Expense Trends by Technology by Plant Age Reinvestment and Operations Expense by Unit Age vs. This book puts an emphasis on practical application. Karambakuwa-Economics Department Denhere Webster -Economics Department Tafirei Felex-Economics Department. Our first step in calculating any company's cost of capital is to consult the relevant annual 10-K regulatory filings with the Security and Exchange Commission (SEC). ) to a company and quite naturally he expects a good return on his investment. Cost of capital is the measurement of the sacrifice made by investors in order to invest with a view to get a fair return in future on his investments as a reward for the postponement of his present needs. , Equity shares, Preference Shares, Retained earnings, Debentures etc.



Wealth consists of natural capital such as agricultural land, forest, oil, gas and minerals, to give a few examples. First, the capital and operations expenditure for establishing and maintaining Aadhaar are taken into account. zDebt is always cheaper than equity, partly because it lenders bear less risk and partly because of the tax advantage associated with debt. Key here is the trade-off between the tax benefits of debt and the associated costs in the form of financial distress and loss of flexibility. Yusoff Fauziah Abu Hasan Suhaila Abdul Jalil 1. The book includes new case studies providing comprehensive discussion of cost of capital estimates for valuing a business and damages calculations for small and medium-sized businesses, cross-referenced to the chapters covering the theory and data. It is estimated that a capital case resulting in execution costs $3-4 million, whereas the typical cost of keeping someone in prison is $30-35,000 a year or less than a million dollars for a typical life sentence. Peter Woicke, Executive Vice President of the World Bank Group (WBG) in charge of the International Finance Corporation (IFC) - Lagos, August 2004. Bruner, Case Studies in Finance: Managing for Corporate Value Creation, 6e, McGraw-Hill, 2009 Estimating the cost of capital. Since the firm’s required return is 10% the cost of capital is greater than the. Capital Investment Decisions: An Overview Capital investment decisions are the responsibility of managers of investment centers (see Chapter 12). Marriot Corporation : the Cost of Capital. Mariott Cost of Capital. Download (PDF) Fiscal Fact No. Indifference point chart case study - Talking Head. As in the case of the investment decision, the adoption of new technology is characterized by 1) uncertainty over future profit streams, 2) irreversibility that creates at least some sunk costs, and 3) the opportunity to delay. It enables to determine the key issues, mission, vision & objective statement, environment analysis, internal analysis, evaluation of current strategies. Need to tighten the case. In this case, the corporate cost of capital needs to be analyzed and hence, to estimate that, a company's long-term source of funds (common Since the corporate cost of capital is used to make decisions today, which will affect the future cash flows, the only acceptable costs are today's marginal.



) ABSTRACT This paper. cost data did not include non-attorney investigative costs or the value of services provided to the prosecution by law enforcement agencies. A brief overview of what these costs entail is discussed in the following sections. It is measured using EBIT-EPS analysis. As in the case of the investment decision, the adoption of new technology is characterized by 1) uncertainty over future profit streams, 2) irreversibility that creates at least some sunk costs, and 3) the opportunity to delay. PEPSI Finance Case Write-up In this writing, we will discuss about WACC, EVA, their uses in evaluate a firm's performance?. 5 Life-Cycle Cost Analysis 160 Chapter Summary 164 Problems 164 Additional Problems and FE Exam Review Questions 169 Case Study The Changing Scene of an Annual Worth Analysis 171. Given a marginal tax rate of 35 percent, calculate (a) the weighted-average cost of capital, and (b) the cost of equity for an equivalent all-equity financed firm. Overview of Capital Budgeting 163 9. It's a money saving tool for filling in financial gaps that all. O Box 408-40200, Kisii. Depending. This study examines the influence of capital structure on the performance of the company. case of Project B. Estimating the cost of capital has been found to be a critical element of implementing VBM concepts. Providing up to $150m of capital at better prices with substantially reduced fees. The Cost of Capital and Access Arrangements in Infrastructure Regulation and Market Reform Examines how the Capital Asset Pricing Model gives inaccurate estimates of the cost of capital A Study into Certain Aspects of the Cost of Capital for Regulated Utilities in the U. If the information presented so far hasn’t inspired you, consider these real-life case studies: Oakland, CA-based Kaiser Permanente, a not-for-profit managed healthcare provider, had no central system to deal with facility information or to support its capital-planning process. Cost Savings from Participating in PJM’s Markets. Case Study: Dell's Working Capital Introduction: Dell designs, manufactures, sells, and services 3.



Whilst not a definitive research study itself, there are notably consistent themes coming out of the analysis: 6 Global Infrastructure Investment 1. It also consists of produced capital – think about infrastructure, machinery, factories, or buildings. Get Your Checklist on What These 4 Startup Case Studies Can Teach You About Failure! A study by the University of Auckland Business School found that while maintaining strong friendships with co-workers generally improves work productivity and morale it also creates a dilemma when trying to reconcile personal relationships with professional. In This Section. and apply into a particular case of comparing performance of Coca Cola and Pepsi based on the past and forecasted data. Gateway draws upon two major sources of capital from the capital markets: debt and equity. WACC (Weighted Average Cost of Capital) is a market weighted average, at target leverage, of the cost of after tax debt and equity. Financial incentives and economic signals must be in alignment with this goal. participants and the positive feedback from the previous years has proven to us that our Cost of Capital Study has come to serve as a. PDF Free Download. risk-free rate, the firm's beta value, and an estimate of the average risk premium associated with. Finance Theory II (15. 9748% (but less than 14. Case Studies. 3 Market Risk Premium 33 3. Weighted Average Cost of Capital (WACC) Introduction Decision Process Importance of WACC WACC and Capital Budgeting WACC Formula Capital Structure 5-1 Introduction. Further costs include operational costs, consumables, communication costs and utilities, besides the cost of human resources employed in operations as well as management. The sustained high number of. Risk-Adjusted Return on Capital (RAROC) A Case Study of Bank Capital RAROC calculates economic profit of a schedule by including the opportunity cost of capital.



Weighted Average Costs of Capital (WACC) is an essential estimation that is needed in order to determine the amount of interest that will. Be sure to explain any assumptions you make to arrive at your answers. Central Maine Power operated under a sequence of MRPs from 1996 to 2013. Cohen makes a mistake by using historical data in estimating the cost of debt for Nike, Inc. Get the knowledge you need in order Purpose This case focuses on the estimation of the cost of capital for a business. These results suggest that incorporating the effects of tax cuts on deficits and the resulting impact on interest rates is a first-. Mid-point capital costs In earlier work, two sets of capital costs were taken from AETA data to perform sensitivity testing on the annual system cost (Elliston et al. The alternative is that you can lease the same equipment for eight years at an annual rent of $8,500, the first payment of which is due on delivery. The cost estimate should identify those principal cost components needed to support effective project management (including monitoring of costs and physical progress during implementation). In addition, a basic review of the cement production process was developed, and summary. Firm Service Rates. The opportunity cost of the movie is the dinner, and the opportunity cost of the dinner is the movie. The senior vice president of job financing for a worldwide oil and gas business should figure out the weighted typical cost of capital for the business as an. When calculating the APR, some business owners may become concerned. INTRODUCTION This assignment is relating to a case study of EnCana Corporation to assess the aspects of the cost of capital of the company. Title Efficient District heating and cooling systems in the EU Abstract Based on a holistic case studies analysis of 8 efficient district heating and cooling systems in different European Member States (Denmark, Estonia, France, Germany, Italy, Spain and Sweden), the study identifies the key. In California, a 2011 study showed death penalty cases are 20 times more expensive.



Case Study -Nike, Inc. Borrowers may negotiate restrictions on this unilateral right limiting variations to price. A sizable portion of Wisconsin’s agricultural production centered on milk sold in bulk to processors. 8 Capital Growth and the Cost of Equity 5. The book includes new case studies providing comprehensive discussion of cost of capital estimates for valuing a business and damages calculations for small and medium-sized businesses, cross-referenced to the chapters covering the theory and data. Two types of research methods most commonly used for data collection are as follows:. Need to tighten the case. The rate we use to discount a company's future cash flows back to the present is known as the company's required return, or cost of capital. If the information presented so far hasn’t inspired you, consider these real-life case studies: Oakland, CA-based Kaiser Permanente, a not-for-profit managed healthcare provider, had no central system to deal with facility information or to support its capital-planning process. While the cost of complying with tightening regulations varies by industry and region, there are other sustainability- related challenges that are beginning to appear on the CFO radar. Weighted Average Cost of Capital (Discount Rate for the Company’s Equity and Debt, appropriately weighted for the Company’s relative mix of Debt and Equity) Morgan Stanley calculated a Terminal Value as of July 1, 2019 by applying a Perpetual Growth Rate range of 3-4% and a Discount Rate range of 12. Capital Budgeting Chapter Exam Instructions. Farahnaz Orojali Zadeh. 1 WACC Overview 27 3. Corporate Restructuring in India: A Case Study of Reliance Industries 817 laws on Mergers and Amalgamations and the toning down of the MRTP Act, all set off a series of restructuring efforts among companies. Determinants of Capital Structure Capital structure refers to the way a firm chooses to finance its assets and investments through some combination of equity, debt, or internal funds. So , company has to mention , what will company pay , if investors provide their money to company.



On average, developing an innovative new drug takes about 12 years, the study concluded, and a firm’s actual expenditures make up only about half of the total reported cost. This is a Darden case study. In this event,. In this case, even if P&G's credit profile did not change, Mr. It may represent the rate of return needed to attract outside investment for the capital project. Change in Retail Rate Revenue from 2008-2017. While you should include your cash. Other aspects of this case study designate applicable reaction steps. Filed Cases Capital expenditures, as they are in almost every quarter, were the main driver of rate cases in Q2. The 5,000 case winery had investment costs of $162. INTRODUCTION This assignment is relating to a case study of EnCana Corporation to assess the aspects of the cost of capital of the company. Let us make an in-depth study of the meaning, importance and measurement of cost of capital. 08% increase in GDP, keeping in mind that this is an average that hides much higher sector specific payoffs achieved in. Justice Marshall, U. At today’s cost structure, the results demonstrate initial savings of $8 billion on a cost base of $30 billion. In general, we attempt to model typical installation techniques and business operations from an installed-cost perspective, and our benchmarks are national averages of installed capacities, weighted by. case is decided. The research began by gathering background information i.



It is in the best interests of a company to find the optimal ratio of debt to equity to reduce their risk of insolvency, continue to be successful and ultimately. Rates are designed to recover the jurisdictional cost-of-service which consists of the demand and commodity costs as determined by the cost classification and cost allocation for each service. It's a money saving tool for filling in financial gaps that all. While it can be a valuable aid in preparation, the material in this note will not be tested. Royal Mail plc: Cost of Capital is a Harvard Business (HBR) Case Study on Finance & Accounting , Fern Fort University provides HBR case study assignment help for just $11. Case Studies. Definition of Cost of Capital The cost of capital is the weighted-average, after-tax cost of a corporation's long-term debt, preferred stock (if The cost of capital is expressed as a percentage and it is often used to compute the net present value of the cash flows in a proposed investment. : Cost of Capital FIN202a-Spring 2011 1. Clorox's cost of capital is. REVIEW OF BUSINESS & FINANCE CASE STUDIES ♦ Volume 2 ♦ Number 1 ♦ 2011 1 GLOBAL COST OF CAPITAL: THE CASE OF GLOBAL COMPUTER SYSTEMS Rathin S. zDebt is always cheaper than equity, partly because it lenders bear less risk and partly because of the tax advantage associated with debt. Globalizing the Cost of Capital and Capital Budgeting at AES, 2004, Case # 204-109, Describes AES' attempt to create a new method of estimating the cost of capital it guide its global capital budgeting decisions. In the first scenario shown in Figure 1, information on expected environmental liabilities or clean-up costs hits the market at timet causing stock price to drop,. Though there are many methods to calculate the costof capital, Weighted Average Cost of Capital (WACC) is widely used. 9748%, L is a better project. the firm is not covering its cost of. Globalisation, Economic Policy, and Equity: The Case of Malaysia Mohammed B. Study Approach The approach used in this study is relatively straightforward: collect utilization data from vendors, compare and average results and apply the cost of telehealth services to the estimated average costs of care delivered in other settings. If we take an average of this $12 billion with the $8 billion base case cited above, we estimate $10 billion in annual cost savings.



Global Locations. Factors Influencing Loan Repayment Performance of. Estimating the cost of capital has been found to be a critical element of implementing VBM concepts. Key here is the trade-off between the tax benefits of debt and the associated costs in the form of financial distress and loss of flexibility. The book includes new case studies providing comprehensive discussion of cost of capital estimates for valuing a business and damages calculations for small and medium-sized businesses, cross-referenced to the chapters covering the theory and data. The Boeing 777: A Financial Analysis of New Product Launch. 2 Figure 1. Assume a marginal tax rate of 24. On the contrary, using the yield-to-maturity approach, would realize more self-consistent pricing, reflecting the true cost of debt of P&G. Weighted Average Cost of Capital (WACC) Introduction Decision Process Importance of WACC WACC and Capital Budgeting WACC Formula Capital Structure 5-1 Introduction. Cost uncertainty is higher than for the pulverized coal‐fired plant only due to the uncertainty associated with the CCS. HEINZ: ESTIMATING COST OF CAPITAL IN UNCERTAIN TIMES Case Analysis San Ramon Section I (Early Class) 05/23/2014 Animesh Dalakoti Kimberly Donellan. Mini Case: 9 - 1 Chapter 9 The Cost of Capital ANSWERS TO SELEECTED END-OF-CHAPTER QUESTIONS 9-1 a. The cost of equity is the amount of compensation an investor requires to invest in an equity investment. Clorox's cost of capital is. Determinants of Capital Structure Capital structure refers to the way a firm chooses to finance its assets and investments through some combination of equity, debt, or internal funds.



ADD To my list. Harms, CFA, CPA/ABV Senior Vice President, Mercer Capital (901) 322-9760 harmst@mercercapital. A SURVEY ON THE EFFECTS OF CAPITAL BUDGETING AND COST OF CAPITAL ON THE CAPITAL STRUCTURE (CASE STUDY: FIRMS ACCEPTED IN TEHRAN STOCK EXCHANGE) Hamid Reza Vakili Fard1, Mahmud Rahmani2 Professor in Accounting, Tehran Science and Research Branch, Islamic Azad University, Tehran, Iran. And the cost of each source reflects the risk of the assets the company invests in. P rison costs are about $950,000, and the cost of adjudication is $850,000, more than three times. Cost of Capital Study 2015 | 3. Weighted Average Costs of Capital (WACC) is an essential estimation that is needed in order to determine the amount of interest that will. Its capital and largest city is Lusaka, which is also a province. Estimating Beta for Cost of Capital - Is It Fair to Apply Short Term Volatility for Long Won Seuk Jang This case deals primarily with the beta estimates for the cost of capital in This case study examines the situation facing Good Health Hospital, a behavioral health facility with. 44% Cohen seems to use CAPM to estimate cost of equity. Case Studies in Knowledge Management. As above K OJ. In consistence with our assumptions on the firm's capital structure the weighted average cost of capital results to be equal to Ameritrade's return on equity which from the calculation of the CAPM results to be 32. Figure 1 is a schematic representation of the generic cost breakdown for mines. – Cost over-runs range from -11. Submitted in partial fulfilment of the requirements for the award of Doctor of Philosophy of Loughborough University.



A company can raise its money from the following three sources: equity, debt, & preferred stock. I'm Lily Jacob MBA Student for Harvard university provide you case study A grade paper Marriott Corporation: The Cost of Capital Case Study Sample fee free. Gives us the opportunity to expedite payment and plan our finanical windows as we see fit. fllphemization, must endeavor to grasp capital IlI1dprofit in all their forms and to establish the Inws whereby the different types of capital (or power, which amounts to the same thing) change into one another. Lenders consider your finished property quality collateral, so lending to you is less risky. Part 3: Case studies Part 3 will consist of two parallel tracks: one for wind energy projects and one for solar PV projects. Whilst not a definitive research study itself, there are notably consistent themes coming out of the analysis: 6 Global Infrastructure Investment 1. Alexis Heideck 1. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. It should be kept low if the management is likely to confront an uncertain environment but how low or how high is the basic question. To determine the long-run cost of capital (based on this optimal capital structure) for the business, you must weight the cost of debt funds and the cost of equity funds by the long-run proportions. Internal funds do not bear any transaction costs. 3 Evaluating Alternatives by Annual Worth Analysis 155 6. 7% per year until it stabilizes at 2. k'ngineering Costs and Production Economics, 14 (1988) 259-266 Elsevier Science Publishers B. zDebt is always cheaper than equity, partly because it lenders bear less risk and partly because of the tax advantage associated with debt. In general, we attempt to model typical installation techniques and business operations from an installed-cost perspective, and our benchmarks are national averages of installed capacities, weighted by. - Nike Case Study "Nike is criticized for using sweatshops in countries like Indonesia and Mexico. (2) Specific Cost and Composite Cost: Specific cost refers to the cost of a specific source of capital while composite cost is combined cost of various In case the debt is raised at premium or discount, we should consider P as the amount of the net proceeds received from the issue and not the face.



Weighted average cost of capital as cost of capital is most favoured. paid up capital = $100. BUDGETING Globalizing the Cost of Capital and Capital Budgeting at AES, Harvard Case 5-206-080 TABLE OF CONTENT Description of the case The Venerus methodology Our mitigations DESCRIPTION OF THE CASE Company overview New countries, new businesses, new risks OVERVIEW OF THE COMPANY. Related Topics : The Cost of Capital. While you should include your cash. 5-2 Decision Process. What is Cost? Cost means 'the amount of expenditure (actual or notional) incurred on or attributable to a given thing. It is worth noting that the purpose of the current study is not to provide a compre-. Borrowers may negotiate restrictions on this unilateral right limiting variations to price. Instead, we provide some useful case studies from the United States for larger ATMs as well as. Define cost of capital. The Company Secretaries are recognized under various securities Laws such as Securities Contracts (Regulation) Act, 1956, Depositories Act, 1996. Also, information about the Risk Weighted Assets (RWA) and Basel Tier 1 capital (equity and other capital that provides the most cushion for depositors and creditors) are used in order to incorporate some estimates of capital adequacy into the analysis. Marriott Corp. Weighted Average Costs of Capital (WACC) is an essential estimation that is needed in order to determine the amount of interest that will. Lusaka has a population of almost 1. Like sensitivity analysis, scenario analysis starts with the construction of a base case scenario. Mariott Cost of Capital. 6 Other Risk Premiums 41 3.



This case study includes several Question 8 – Cash Flow Discounting and Stock Price Estimation (Lecture 5) Using this Beta estimate, calculate the cost of equity (Ke) for Nike based on the. Identifying Case Studies. This is typically 5-10% or less of the wholesale value of wind energy. Property taxes 1. Please see the attached files. Statement of the Problem. In its base case, the MIT (2003) study had applied a higher cost of capital to nuclear power that it applied to either coal- or gas-fired power. The median cost of a case that was authorized and went to trial was more than twice the cost of a case that was authorized but resolved through a plea agreement. Weighted Average Costs of Capital (WACC) is an essential estimation that is needed in order to determine the amount of interest that will. It is necessary to calculate the cost of capital to know the discount rate. View Essay - 113316907-Case-Study-Nike-Inc-Cost-of-Capital from FINANCE 300 at University of Louisiana, Lafayette. MULTINATIONAL CAPITAL. The Beta Corporation has an optimal debt ratio of 40 percent. 1 For the first four key themes above, the study ex-amines the motivations of countries to limit capital. The earliest studies often involved a case study of a single drug (typically without accounting for the cost of failed projects) or they analyzed aggregate data. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. At the time Mr.



5 years and cost taxpayers an average $2. Conceptually, the WACC represents the blended opportunity cost to lenders and investors of a company or set of assets with a similar risk profile. Use the firm's A+ rating and the default spreads provided in the course notes to estimate the firm's cost of debt (K. - These costs are higher because of unique breadth of capital cases, procedural and. Its cost of equity capital is 12 percent and its before-tax borrowing rate is 8 percent. fllphemization, must endeavor to grasp capital IlI1dprofit in all their forms and to establish the Inws whereby the different types of capital (or power, which amounts to the same thing) change into one another. Each SGIG DA utility installed a distinct set of DA assets, tested different capabilities, and deployed assets at a different scale—enabling each utility to test technology integration and explore costs and. The aim of this joint report by Euroclear and Oliver Wyman is to help leaders in capital markets to understand the potential of the technology, lay out the paths for its adoption, and present the decisions that are required by capital markets firms today. A company's cost of capital is the cost of its long-term sources of funds: debt, preferred equity, and common equity. Validate the accounting results. It is important, because a company’s investment decisions related to new operations should always result in a return that exceeds its cost of capital – if n. In California, a 2011 study showed death penalty cases are 20 times more expensive. Farahnaz Orojali Zadeh. 4 Impairment Test 52. CBA in the framework of the EU funds 15 Case Study – Water and Waste. 488 million:. Cost of Capital case study solution contains an 1,100 word answer to the four questions below, a financial analysis in excel that compares Joanna's financials to the correct financials, and a PowerPoint presentation that summarizes the case and walks the audience thru the financial analysis. Consultancy. Nucleus Research Report P39 - City of Elgin ROI Case Study - Salesforce “We didn’t look at it as setting up a contact center, but as a catalyst for improvement – a way to invest in tech and bring the city to the forefront of what is available.



Single or Multiple Costs of Capital I agree with Cohen on her decision to compute only one cost of capital for Nike, given the company's various business segments. Case studies More firepower As customers of Deutsche Bank’s structured commodity financing (STCF) services return for more liquidity, flow highlights key deals from 2018 in a journey from the North Sea to Greater China Read more. better CSR scores exhibit lower cost of equity capital. O Box 4274-40200, Kisii. ) to a company and quite naturally he expects a good return on his investment. - Nike Case Study "Nike is criticized for using sweatshops in countries like Indonesia and Mexico. The case study brings the concept of WACC through a discussion between a professor and his students. The cost of capital approach is applied to the reference entity SCR with a fixed unitary cost of capital. Calculate Cost of Capital from following data Risk Free Rate Equity Risk Premium Cost of Debt Debt : Equity Ratio 8. Free Cash Flow Valuation 179 10. Case Study: Midland Energy Resources, Inc. 32/MWh, for a cost benefit ratio of about 8. cost of capital. This tenth edition of our Cost of Capital Study also marks a. At today’s cost structure, the results demonstrate initial savings of $8 billion on a cost base of $30 billion. and cost-effective solutions, with utilities facilitating those markets both in their system planning and in day to day operations. For patients receiving a full 12 months of chemotherapy, hospital outpatient care costs 53 percent more than in the physician office-based setting.



This Report has been. Cost of Capital 1. Question IHow are Mortensen's estimates of Midland's cost of capital used? 3. Cost of capital components. 3 million, with population densities of up to 1,500 persons per hectare and an average population density of approximately 150 persons per hectare. Click here to know more. risk-free rate, the firm's beta value, and an estimate of the average risk premium associated with. Cost of Capital When Discounting Residual Profit A Case Study Economics Partners, LLC White Paper Tim Reichert, Ph. This situation is exacerbated when the cityis also capital. In general, we attempt to model typical installation techniques and business operations from an installed-cost perspective, and our benchmarks are national averages of installed capacities, weighted by. Overall, this guide highlights O&M programs targeting energy and water eficiency that are estimated to save 5% to 20% on energy bills without a signiicant capital investment. Also, information about the Risk Weighted Assets (RWA) and Basel Tier 1 capital (equity and other capital that provides the most cushion for depositors and creditors) are used in order to incorporate some estimates of capital adequacy into the analysis. This is a Darden case study. Health Care Finance Basic Tools for Nonfinancial Managers Third Edition Judith J. On the other hand, an expense uses up or reduces capital and does not add to the balance sheet of the organization. Cost Of Capital Case Study Pdf.