Cost of Capital: Providing business guidance for better financial decisions

Author: A. Ogilvy
Publisher:
Publish Date: 2005-08-01
Features: The cost of capital is a fundamental financial tool in business decisions. It drives value creation and destruction metrics; it forms the basis for making decisions using cash flows and other frameworks. The purpose of this book is to help people in the business world utilize the cost of capital in practical situations. The actual cost of capital describes the key issues in understanding and applying the cost of capital in today's world, drawing on principles from financial management. The author applies these principles to the context of major investment decisions. For example, when evaluating new investments and acquisitions, should a company use its own cost of capital? What cost of capital should a U.S. company adopt when evaluating an investment located in, say, the Philippines? For a typical investment, which risks are more important—specific risk or systematic risk? How should these risks be reflected in, for instance, risk capital situations? Debt is cheaper than equity—so why don’t companies raise more debt financing? When assessing and evaluating, most practitioners use the weighted average cost of capital—but how can other methods be utilized? This book will help you find the answers to these questions. The Actual Cost of Capital is a must-read for anyone involved in practical cost of capital decisions. It integrates new academic insights into real-world practical requirements, and the author leverages their experience in consulting for governments and international blue-chip companies to keep readers up-to-date. The Actual Cost of Capital covers topics such as model selection, calculating the cost of capital using real-world data, and calculating the cost of capital in an international context. The book also includes examples of the practical application of the cost of capital in business valuations, high-tech enterprises, and discounts and premiums with a wide range of applicable cost of capital scenarios.