A Historical Commodity Price Index Will Illustrate Prices Of A Commodity At Specific Historical Times

Category: Finance.

The Weighted Average Cost of Capital( WACC) is a calculation of a company s proportionately weighted capital according to specific categories.

It s computed by multiplying the cost of each capital source by its proportional weight( % of total capital) and then working through this equation. All sources of capital- common stock, bonds, preferred stock, and any other debt are included. WACC= (E/ V) Re+ (D/ V) Rd* (1- Tc) Where: Re= cost of equity. E= market value of the firm s equity. Rd= cost of debt. D= market value of the firm s debt. E/ V= percentage of financing that is equity.

V= E+ D. D/ V= percentage of financing that is debt. The WACC is useful in determining how a company gains its capital. Tc= corporate tax rate. Is it financing itself through debt or equity? Computing WACC offers insight into a company s ability to make returns upon its investments and, money for investors, hence. The WACC helps answer that question.

The WACC is often used by internal management to steer the company toward beneficial, moneymaking projects and away from losing ones. Over a given period of time the average of these indexed prices gives the commodity s historical price. A historical commodity price index will illustrate prices of a commodity at specific historical times. Speculation on future commodity prices can be made on fluctuation s of the commodity s historical price. Index closing prices are the numbers we hear given on nightly news broadcasts. The spot commodity price is the price of a commodity" on the spot" where it is being sold on the cash market. The NYSE index and NASDAQ index are both examples of whole market stock indices.

The prices of these broad indices are determined by using the closing prices issued by the primary exchange for each member stock in the index. The Dow Jones Industrial Average and the S& P 500 are examples of broad- base stock indices. If the price changed during the trading day, the new price is used to calculate the index closing price. Country risk rates reflect the risk of investment in that country. Thus, with the S& P 500 calculations of price fluctuations for all 500 member stocks each day are made to determine the daily index price. Government stability, both political and financial, factor into this heavily. The magazine Euromoney puts out a survey of country risk and ranks them.

Banks may use this term to determine whether or not it wants to provide financing to a company that does a lot of business overseas.