The article discusses how companies estimate the cost of capital to make smart investment decisions. Financial managers analyze cash flows from long-term assets to see if projects will bring in enough money to grow the company. They use measures like Net Present Value and Internal Rate of Return to evaluate projects. The discount rate used to calculate the present value of cash flows is based on the company's Weighted Average Cost of Capital. This rate is adjusted depending on the risk level of the project. By doing this, companies can decide which projects are worth investing in to increase their value and make shareholders happy.