A Multiperiod Cost of Capital Concept and its Impact on the Formulation of Financial Policy

  • A. I. Diepenhorst
Part of the Nijenrode Studies in Business book series (NSIB, volume 6)

Abstract

The concept of the firm’s cost of capital (FCOC) has proved to be a useful device for both elementary and advanced teaching. In addition, it is generally held in high esteem as a powerful analytical tool for both theoretical and practical research. Theories of financial structure and FCOC generally employ a cash-flow stream of a perpetual form, which simplifies its capitalization. As seen in Table 1, when such cash flows (CFs) are conceived to be uncertain, the uncertainty involves only the level on which the perpetuities are realized.

Keywords

Income Expense 

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References

  1. [1]
    Diepenhorst, A.I. Cost of and Return to Capital, Financial Structure, and Financial Policy 1976 . Centrum voor Bedrijfseconomisch Onderzoek, CBO reprint 15/F, 1976 (only available in Dutch).Google Scholar
  2. [2]
    Myers, S.C. “Interactions of Corporate Financing and Investment Decisions: Implications for Capital Budgeting,” Journal of Finance (1974), p. 11.Google Scholar

Copyright information

© Martinus Nijhoff Publishing 1981

Authors and Affiliations

  • A. I. Diepenhorst
    • 1
  1. 1.Erasmus University RotterdamThe Netherlands

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