This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Dykstra: Determining the Cost of Equity

On Monday, the markets were pumped up by details of the administration's plans to restore the banking sector. The NYSE jumped 7.3%, and the Dow Jones Industrial Average gained 6.8% to close near 7,776. Those big gains were all we needed to score a couple of wins for my deep-in-the-money options trading system.

Cisco (CSCO - Get Report), which had been in play for 103 days, rang the bell, adding $3,900 to my win column. Hewlett-Packard (HPQ - Get Report) also rounded home, winning $1,000 after just one week in play. These additions to my scorecard bring my record to 98-1. I'm getting closer than ever to an even 100 since began distributing my Nails on the Numbers newsletter last spring.

My first win of $1,000 last year came April 2, on Sigma Designs (SIGM - Get Report) on its third trading day out. And a successful closeout of my Garmin (GRMN - Get Report) position came the following day - the same day that I picked it.

Not quite in the win column yet, Microsoft (MSFT - Get Report), my March 13, 2009 pick, came within 5 cents of winning on Monday. Another up day in the stock will push it over the top.

Those wins are on top of this month's $1,000 win in Cameron International (CAM - Get Report), bringing my total wins to date in March to $5,900.

Last week, I covered how to determine a company's cost of debt, which is one part of total capital. This week, I will look at how to calculate the cost of a firm's equity. When we combine them, we get the company's weighted average cost of capital. This number becomes useful when comparing it to return on capital -- to see if the company is using its assets to its best advantage.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
CAM $52.81 0.00%
CSCO $28.82 0.00%
GRMN $46.19 0.00%
HAL $48.00 0.00%
HPQ $33.26 0.00%


DOW 18,080.14 +21.45 0.12%
S&P 500 2,117.69 +4.76 0.23%
NASDAQ 5,092.0850 +36.0220 0.71%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs