Do you want BuboFlash to help you learning these things? Or do you want to add or correct something? Click here to log in or create user.



#cfa-level-1 #corporate-finance #reading-36-cost-of-capital #study-session-11
For the analyst seeking to evaluate a company’s investment program and its competitive position, an accurate estimate of a company’s cost of capital is important as well.
If you want to change selection, open original toplevel document below and click on "Move attachment"

Parent (intermediate) annotation

Open it
in contrast, if the company invests in projects whose returns are less than the cost of capital, the company has actually destroyed value. Therefore, the estimation of the cost of capital is a central issue in corporate financial management. <span>For the analyst seeking to evaluate a company’s investment program and its competitive position, an accurate estimate of a company’s cost of capital is important as well.<span><body><html>

Original toplevel document

1. INTRODUCTION
, the company is producing value today. But, how much value? The answer depends not only on the investments’ expected future cash flows but also on the cost of the funds. Borrowing is not costless. Neither is using owners’ funds. <span>The cost of this capital is an important ingredient in both investment decision making by the company’s management and the valuation of the company by investors. If a company invests in projects that produce a return in excess of the cost of capital, the company has created value; in contrast, if the company invests in projects whose returns are less than the cost of capital, the company has actually destroyed value. Therefore, the estimation of the cost of capital is a central issue in corporate financial management. For the analyst seeking to evaluate a company’s investment program and its competitive position, an accurate estimate of a company’s cost of capital is important as well. Cost of capital estimation is a challenging task. As we have already implied, the cost of capital is not observable but, rather, must be estimated. Arriving at a cost of ca


Summary

statusnot read reprioritisations
last reprioritisation on suggested re-reading day
started reading on finished reading on

Details



Discussion

Do you want to join discussion? Click here to log in or create user.