Estimating the cost of capital

Abstract

This paper introduces the ways of estimating the cost of capital. It briefly reviews the main theories of capital structure before explaining how the use of fixed‐interest debt finance might affect the cost of capital. It then considers ways of estimating the cost of equity and finally brings results together. Two final issues are considered: how the cost of capital can be used to appraise projects like the ones the firm is already undertaking; and how it can be used to consider projects that lie outside the normal range of business activities of the firm.

Citation

Ward, C. (1999), "Estimating the cost of capital", Journal of Corporate Real Estate, Vol. 1 No. 3, pp. 287-293. https://doi.org/10.1108/14630019910811088