Cost of Capital and Capital Structure Policy

Christophe Thibierge and Andrew Beresford
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Christophe Thibierge: ESCP Europe
Andrew Beresford: ESCP Europe

Chapter 5 in A Practical Guide to Corporate Finance, 2015, pp 130-157 from Palgrave Macmillan

Abstract: Abstract One of the goals of finance is to choose the right investments. In Chapter 3 we learned how to work through investment decisions. But we had simplified things; the discount rates were already given to us. In this chapter we are going to deal with a fundamental question: How do we set the discount rate for a project? In other words, how do we determine a return expectation? What is the justification for Scrooge McDuck to say: ‘I’m willing to invest in the mines of Palo Alto, but I want my investment to give me an annual return of 13%.’ Drawing on the knowledge acquired in the preceding chapter, we are going to try to answer all of these questions.

Keywords: Stock Market; Capital Asset Price Model; Free Cash Flow; Monthly Return; Income Statement (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-137-49254-8_6

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DOI: 10.1057/9781137492548_6

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