Hands-On Artificial Intelligence for Banking by Jeffrey Ng

Author:Jeffrey Ng
Language: eng
Format: mobi, epub
Tags: COM004000 - COMPUTERS / Intelligence (AI) and Semantics, COM044000 - COMPUTERS / Neural Networks, COM042000 - COMPUTERS / Natural Language Processing
Publisher: Packt Publishing
Published: 2020-07-10T04:59:05+00:00

Calculating the weighted average cost of capital

The objective of this step is to ensure the following happens:

The ideal capital structure is rewarded by the lowest cost of capital with a mix of debt and equity.

The cost of equity is defined by the capital asset pricing model.

The cost of debt is defined by the cost of credit risk, plus the cost of the risk-free rate. The cost of credit risk is calculated by the credit model we built in the previous chapter.

Minimize the following:

Weighted Average Cost of Capital (WACC)

Cost of debt

Cost of credit risk

Cost of equity

Unlevered beta

Levered beta

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