 We're going to talk about basically the merger of cost of equity and cost of debt, and it is a process, and you've probably read a little bit about this already. It's something called weighted average cost of capital, which as you might imagine people in finance refer to as WACC, and it's the distillation of these two processes plus a little better understanding of long-term debt and the market capitalization of a stock. This is an example, using this so you can understand a bigger picture of how companies make decisions about spending money, how individuals make decisions about investing in stocks, and it's critical I think as you expand your thinking from an entrepreneurial perspective about how business decisions are arrived at and what tools people use to make risk analysis. This is probably going to be one or two short little videos, and just to give you some sense of the process here, and this is very much a finance calculation, and it comes down to the two principal pieces are cost of debt and cost of equity, and CAPM is called its capital marketization, so you can understand what some of these initials mean. Cost of debt really revolves around two things, the estimated average debt rate that a company or business is paying, and that can usually be arrived at by understanding the cost that a company is paying to borrow money, either borrowing money from a bank or with bond issues where it issues its own bonds to raise dollars for the business. So just in this example, we're looking at an average debt rate of 9.9%. The effective tax rate is, we're making reference to federal tax only here, this is an estimate of what the company would pay in taxes if it had a profitable year, so we're just plugging these in for analysis sake. So the cost of debt after tax is then arrived at in the equation here, which is pretty simple. It's F4 times 1 minus the tax rate, which gives us an answer of 6.2%. That's a quick breakdown of cost of debt. I'm going to talk about cost of equity. First thing is when you think about cost of equity, think about investing your dollars. So if you were going to invest money and you wanted to invest money risk-free, you would look at something that has a guaranteed payment. And the most popular risk-free investment literally in the world are U.S. federal Treasury bonds. And this Excel piece was put together about a year and a half ago. At that time, the rate on a 10-year T-bond, T-bill, sorry, was 2.6%. So that's your risk-free rate. There's no risk. You're going to earn that money, and that's where you see the performance number. The idea is really trying to understand comparative measure of how a stock performs relative to the market as a whole. I've put a link on the instructional piece for this section of the course so you can learn a lot more about it. If you're an amateur investor or a professional investor, you may know a great deal about this already, and I'm not going to dive into it deeply for this discussion here. But we're going to come back on the next video to looking at cost of equity, and then on the final video, so it's going to be in three of these things, we're going to break down this analysis here that gets us to weighted average cost of capital. All right, here we go.