Business, Management and Accounting
2 years ago

New study reveals key insights on firm's cost of capital.

Review of Quantitative Finance and Accounting
A note on the cost of capital with fixed payout ratios
Ralf Diedrich, Stefan Dierkes, Hans-Christian Gröger

Paper Summary

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The article explores a new way to calculate the cost of capital for companies by using a fixed payout ratio. This approach helps to better understand the relationship between the cost of equity for companies with and without debt. The findings suggest that this method can provide more realistic and practical valuation techniques for businesses.