LEARNING TEAM 1

Learning Team
Ginnette M. Baez Diaz
Nathalie Salib

Carlos Vizcarrando

Wanda Laureano

Carlos Rivera

University of Phoenix

FIN/571

August 26, 2014

Prof. Javier Baella-Silva


LEARNING TEAM 2


Week 5 Video
In the video Cost of Capital, we can see a company that has a great amount of debt and
a great income also. The cost of capital is the average cost of the debt in equity that a company
holds in its capital base. To do this, the company uses the Capital Asset Pricing Model. This
model uses the risk free rate that can be found in the treasury market, and the beta of the
company. This last one is a calculated number that is based on the historical number based on
the historical performance of the stock versus an index such as S&P 500. Firms capital base
consists of various sources of capital that the firm can borrow from the exiting base.
Must companies have debt and equity. Debt is money that the firm has borrowed from
people who are loaning money in return for a promised interest. In equity you have investors
that have invested in a company and there is no interest to be paid back. The capital base of a
firm or company is the mix of the debt and the equity.
Businesses are changing every day and this can make that businesses mix may change. A
company may or may not be able to handle debt. A company may handle it yesterday but may
not be able to handle it tomorrow. This makes difficult the decision of what amount of debt a
company can handle.
The Cost of Capital in the case of Pfizer use a combined method of debt and great
income. The debt is from compromises that the company already have and from stake holders or
investors that loan money to companies to obtain their operations running in return for a
promises interest. The equity means that investors not have a proper interest on being paid.
The Pfizer company works with both models to operate their capital and expand
their operations day after day. The pharmaceutical business improve day after day with new
LEARNING TEAM 3


operation ,techniques and new improvements that demands high improvements that would need
to be finance for the company succeed on the fierce competition on the market.





















LEARNING TEAM 4


Reference
Concept Review Video: Cost of Capital. Retrieved from University of Phoenix website.