Capital cost and capital structure of businesses in the meat industry listed on the Warsaw stock exchange - a discussion about the problme of valuation

Tomasz Pawlonka and Justyna Agnieszka Franc- Dąbrowska

No 289207, Problems of Agricultural Economics / Zagadnienia Ekonomiki Rolnej from Institute of Agricultural and Food Economics - National Research Institute (IAFE-NRI)

Abstract: The cost of capital is an important parameter in the assessment of efficient use of sources for business financing. This is also a measure enabling the indirect verification of the basic aim of the company’s long-term business operations – an increase in value. So far, not fully transparent model of evaluating the cost of equity, both in theory and practice, has been developed. As a result, estimations concerning the cost of capital and value of companies are to a large extent subjective. The research – using the CA PM model together with its accepted parameters – proves the stability and precision of the applied methodology. Estimating the cost of capital is of special significance in companies from the Polish meat industry. These entities (in the years under investigation) were obliged to increase investment expenditures as a result of Poland’s accession to the European Union and the necessity to adjust to western-European standards and further consolidation – both in the vertical and horizontal dimensions. Pro-developmental activities required changes in sources of finance and as a result – changes in capital structure. The dilemma concerning “safer” yet more expensive equity, or “cheaper” yet less stable foreign (interest) capital remains unsolved to this day.

Keywords: Agricultural and Food Policy; Agricultural Finance (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:ags:iafepa:289207

DOI: 10.22004/ag.econ.289207

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