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THE COST OF CAPITAL AS A WEIGHTED AVERAGE
The Journal of Finance, 1975IN RESEARCH, teaching, and application we have found it convenient for some time now to compute the cost of capital as a weighted average of the costs of the various sources of capital. This entire notion, though, that the true cost of capital can be computed as a weighted average of the component costs has recently been questioned.
Nantell, Timothy J, Carlson, C Robert
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The weighted average cost of capital is not quite right
The Quarterly Review of Economics and Finance, 2009Abstract A firm's cost of capital used in discounted cash flow analysis is commonly calculated as a weighted average of the after tax costs of the firm's various sources of financing (equity, debt, preferred stock). Its use implies that for investment projects earning precisely the WACC the cash (in)flow is exactly sufficient to reward all the ...
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Investment and the Weighted Average Cost of Capital
CFA Digest, 2016Tao Shen
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Investment, Q, and the Weighted Average Cost of Capital
SSRN Electronic Journal, 2012In a standard q-theory model, corporate investment is negatively related to the cost of capital. Empirically, we find that the weighted average cost of capital matters for corporate investment. The form of the impact depends on how the cost of equity is measured.
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