The Cost of Capital to the Firm
A. Koutsoyiannis
Abstract
A. Koutsoyiannis
Abstract
The cost of capital is a critically important topic for several reasons. First, the cost of capital determines the supply of funds to the firm. Second, the cost of capital is widely used by firms for their investment decisions (see Chapters 4 and 11). Third, knowledge of the cost of capital and of how it is influenced by debt and retentions is essential for determining the optimal capital structure and the optimal dividend policy of the firm. 1
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The cost of capital is a critically important topic for several reasons. First, the cost of capital determines the supply of funds to the firm. Second, the cost of capital is widely used by firms for their investment decisions (see Chapters 4 and 11). Third, knowledge of the cost of capital and of how it is influenced by debt and retentions is essential for determining the optimal capital structure and the optimal dividend policy of the firm. 1
Key concepts: Cost of capital, Weighted average cost of capital, Marginal cost of capital schedule, Capital (architecture), Dividend, Capital structure, Investment (military), Physical capital