A Study on Cost of Capital
Journal Title: International Journal of Empirical Finance - Year 2015, Vol 4, Issue 1
Abstract
Cost of capital which is used as a financial standard plays a crucial role in capital budgeting decisions. It is the discount rate applied for evaluating the desirability of investment projects. An investment project can be accepted if it has a positive net present value. Besides, financial decisions taken by the management of a firm are appropriately evaluated using the weighted average cost of capital. The cost of capital influences debt policy of a firm. While designing the proportion of debt and equity in the capital structure, a firm aims at minimizing the overall cost of capital. The cost of capital is widely used in deciding about the method of financing at any particular point of time. It plays an important role in dividend decision. Cost of capital is one of the important metrics which decides the amount of investment in current assets. Keeping the importance of cost of capital in corporate finance, the present study has been undertaken covering ten manufacturing companies listed in Bombay Stock Exchange, India. Financial data are collected for 10 years from 2004 to 2013. The results of regression analysis indicate the factors significantly influencing various components of cost of capital.
Authors and Affiliations
Ravi Thirumalaisamy
Keywords
Related Articles
- EP ID EP27179
- DOI -
- Views 335
- Downloads 11
Testing Limited Arbitrage: The Case of the Tunisian Stock Market
This paper aims at showing that arbitrage, theoretically used as a mechanism of establishing equilibrium in financial markets, is limited in reality. Because of numerous obstacles and risks to arbitrage, assets prices...
Opinion Leadership and Marketing of Life Assurance in Selected Insurance Firms in Nigeria
Marketing of life assurance policies in a slow-paced moving Nigerian economy, and a sector almost ravaged by negative perception and poor consumer attitude, has over the years pose onerous task to insurance business pr...
Effect of Government Accounting Standards of Quality of Financial Statements and Implications on Local Government Accountability Performance: A Case Study in the Department Pekanbaru
This study aims to determine how much influence the implementation of Governmental Accounting Standards for Quality of Local Government Finance Report and Its Implications on the performance Accountability Office Pekan...
Research of Risk Measure for the CSI 300 Index Futures
The CSI 300 stock index futures are the first financial futures in China; it is also one of the effective hedging tools for investors in stock market. Effective management for risk of the CSI 300 stock index future mark...
Capital Structure, CSR Disclosure, Leverage, Firm Size and Financial Performance in Indonesia
The purpose of this research is to understand the influence of capital structure, corporate social responsibility (CSR), leverage, and firm size, on financial performance. In this research, researcher use ROA to measure...