The apostrophize of crown is a Critical
Element in Business Decisions
A herald submitted in partial fulfilment of the requirements for the award of Master of scholarship of the Loughborough University.
November 2004
ABSTRACT
This paper discusses the issue of whether the Cost of Capital is a little element in business decisions through the topics of Capital body structure and the effects of the Cost of Capital on a companys competitiveness.
Through the put on of both qualitative and quantitative data, this paper discusses the two important perspectives on the Cost of Capital, that it is or is not a critical element in business decisions, as well as the advantages and disadvantages of use of debt and equity within heavy(p) structures and the views of the effects of the Cost of Capital on companies competitiveness.
Investment in capital assets naturally requires rough form of finance, and since the method of finance that is employed by a particular degraded defines their cost of capital (which in bowl over affects the amount of investment undertaken), it is obvious that the investment and finance decisions of the firm atomic number 18 inexorably linked (Brewster, 1999).
The degree to which the Cost of Capital is critical in business decisions will be drug-addicted upon the characteristics of each firm.
While theory promotes the concept that the cost of capital is critical in business decisions, in practice it is dupe that the firms that enjoy the greatest success in the long-run ar those with an entrepreneurial outlook that are willing to substitute concerns for the cost of capital with taking greater risks in their financing decisions in order to achieve continued innovation and success. While these are often the firms that are heavily geared towards R& group A;D and the goal of out-innovating their competitors, the understanding that the cost of capital is...
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