Several studies examine the cost of capital for large firms [Gitman and Mercurio
(1982), Jog and Srivastava (1995), and Oblak and Helm, Jr. (1980)] and other studies
examine the approximate cost of capital facing large companies [Schall, Sundem, and
The following closed ended question was posed; “In general, which of
the following does your company consider to be the best discount rate?” The vast
majority, 83.2% chose WACC, while 7.4% chose the cost of debt, 1.5% chose the cost of
retained earnings, and 1.0% chose the cost of new equity. A minority (5.4%) chose cost
of equity for a project financed with equity and cost of debt for a project financed with
debt and 1.5% indicated they had another measure for calculating the base discount rate.
Several studies examine the cost of capital for large firms [Gitman and Mercurio(1982), Jog and Srivastava (1995), and Oblak and Helm, Jr. (1980)] and other studiesexamine the approximate cost of capital facing large companies [Schall, Sundem, andThe following closed ended question was posed; “In general, which ofthe following does your company consider to be the best discount rate?” The vastmajority, 83.2% chose WACC, while 7.4% chose the cost of debt, 1.5% chose the cost ofretained earnings, and 1.0% chose the cost of new equity. A minority (5.4%) chose costof equity for a project financed with equity and cost of debt for a project financed withdebt and 1.5% indicated they had another measure for calculating the base discount rate.
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