Category Archives: CONCEPT AND MEASUREMENT OF COST OF CAPITAL

IMPORTANCE AND CONCEPT

IMPORTANCE AND CONCEPT As mentioned above, the cost of capital is an important element, as a basic input information, in capital investment decisions. In the present value method of discounted cash flow technique, the cost of capital is used as the discount rate to calculate the NPV. The profitability index or benefit cost ratio method similarly employs it to determine the present value of future cash inflows. W

CONCEPT AND MEASUREMENT OF COST OF CAPITAL

CONCEPT AND MEASUREMENT OF COST OF CAPITAL INTRODUCTION The discussions in Chapters relating to capital budgeting have shown the relevance of a certain required rate of return as a decision criterion. Such a rate is the cost of capital of a firm. Apart from its usefulness as an operational criterion to accept/reject an investment proposal, cost of capital is also an important factor in designing capital structu