Hi, I have one question that is bothering me.
When a Company issues shares ie. USD 100 m.and gets money from IPO all this money goes to Shareholder’s Capital in the Balance Sheet.
And from now on the Company doesn’t have to pay anything to investors who bought its shares. So the cost of equity is not a real cost as opposed to cost of debt which is a real cost, meaning the Company has to pay interest and repay principal.
So why do we include cost of equity in WACC in DCF models?