Cost of Capital
Why is it important for firms to consider cost of capital when making decisions to invest in long-term projects? Explain what sources of funds should be considered in computing weighted average cost of capital (WACC) and why it is important to consider WACC rather than the cost of just one source of financing. Provide an example of a major investment by your employer, or a large firm in Saudi Arabia you are familiar with, and explain what factors were probably considered in establishing a required rate of return on the investment and why.
Search for an academic or industry-related article. Select an article that relates to cost of capital and doing business in Saudi Arabia.
Direction:
For your discussion post, your first step is to summarize the article in two paragraphs describing what you think are the most important points made by the authors (remember to cite the information, as appropriate).
Be sure to support your statements with logic and argument
citing all sources referenced and inside the text.
APA style academic writing
6-8 paragraphs include ( introduction – body – conclusion )
Solution Preview
Cost of Capital
The article that I identified that relates to cost of capital is one that is titled Economic consequences for firms’ cost of capital that was published on the Economics, Management, and Financial Markets journal. The author of the article is Florin Coman. In the article, the author discusses some the link between earnings of a company and the cost of capital. One of the biggest link that is discussed in the link of cost of capital to the interest rates.
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