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Cost of Debt
The expected interest cost on new debt times one minus the marginal tax rate due to the fact that interest payments are tax deductible
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Weighted-Average Cost of Capital (WACC)
The weighted average of the cost of debt and the various equity components of the firm's capital structure.
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Dividend Growth Model
Amodel used to estimate the cost of equity.
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CAPM (Capital Asset Pricing Model)
A modle used to estimate the required return on a firm's cost of capital.
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Reasons to hold cash
Tranasction purposes, precaution purposes, speculative purposes, and compensating balances
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Transaction balances
Cash available to make expected day-to-day payments of various obligations.
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Target Cash Balance
The desired cash balance that the firm believes is necessary to safely conduct business.
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Sychronizing Cash Flows
The matching of the timing of cash outflows with the timing of cash inflows.
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Speculative Balances
Cash available to the firm to take advantage of business oppotunities
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Precautionary Balances
Cash balances held as a reserve for random or unexpected fluctuations in cash inflows or outflows.
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Netting
A cash mangement tool that maximizes cash flow by reducing the administrative and transaction fees for currency conversion.
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Net Float
The sum of disbursement float and the collection float.
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