Procter & Gamble: Cost of Capital (Abridged)

Abstract

This case asks the student to compute Procter & Gamble's weighted average cost of capital to determine whether another company should enter the household-products market; the student must also compute Clorox's cost of capital as a check on the P&G estimate. The case emphasizes the conceptual as well as the mechanical aspects of computing cost of capital for a company with homogeneous business risk and stable capital structure. (The unabridged version of the case is UVA-F-0931.)