O'Reilly logo

The Essentials of Financial Analysis by Samuel Weaver

Stay ahead with the world's most comprehensive technology and business learning platform.

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, tutorials, and more.

Start Free Trial

No credit card required

CHAPTER ELEVENCOST OF CAPITAL, HURDLE RATES, AND FINANCIAL STRUCTURE

Chapter 9 examined numerous capital investment analysis techniques, and Chapter 10 discussed how to determine cash flows through the use of numerous project examples. Paramount to the investment evaluation is the discount rate— the cost of capital. The cost of capital is the opportunity cost of funds invested in the firm. It represents the minimum acceptable rate of return for corporate investments. In the Chapter 10 new product example, a 0.5 percentage point change in the cost of capital (from 8.0 to 7.5 percent) had a significant impact on the net present value (NPV). The NPV increased by $564 thousand, or 60 percent.

For financial executives, managing the cost of capital ...

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, interactive tutorials, and more.

Start Free Trial

No credit card required