of projects must exceed in order to create wealth for shareholders. Clearly, the cost of capital, as implied by the company’s financing mix, is a good starting point when arriving at the hurdle rate for capital investment appraisal (capital budgeting), but the way in which the company arrives at this cost
By Jon Tucker
This checklist explains what the cost of capital is, how its different elements are calculated, and the role of the hurdle rate.
with the sub-prime CDOs was that the ratings agencies lost sight of what was in their long-term self-interest. In fact, people confusing short and long-term success was one of the dominant problems of the crash. Capitalism should be a long-term game.
By Matthew Bishop
We take care not to confuse issues. We don’t benefit from higher tax rates. However, the higher the tax rate we endure, the more important becomes the choice of capital structure.
By John C. Groth
Definitions of ’capitalization rate’ and meaning of ’capitalization rate’ are from the book publication, QFINANCE – The Ultimate Resource, © 2009 Bloomsbury Information Ltd. Find definitions for ’capitalization rate’ and other financial terms with our online QFINANCE Financial Dictionary.