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Analysis On The Causality Relationship Between Investments And The Capital’S Marginal Cost

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  • Irina CIBOTARIU

    (Stefan cel Mare University of Suceava, 720229, Romania)

Abstract

Capital’s cost is the result of two kinds of behaviours, namely the entrepreneur’s behaviour, on the one hand, and the investor’s behaviour. These two types of behaviours have a common background, namely maximizing the value of the business entity. The business entity itself can be considered as the very expression of the financing costs which are part of the optimization process of its financial strategy.The diversity of the investment options requires the assignment of those financial resources which are based on estimating the entity’s value which refers to the conversion of the future incomes into the present turnover of the business as such. Thus, there is an occasional cost from the point of view of the investors, whereas for the users, there is an average cost involved due to the fact that one needs to take into account the existence of the financial structure itself which is responsible for the existence of both the equity and the loan capital.

Suggested Citation

  • Irina CIBOTARIU, 2020. "Analysis On The Causality Relationship Between Investments And The Capital’S Marginal Cost," European Journal of Accounting, Finance & Business, "Stefan cel Mare" University of Suceava, Romania - Faculty of Economics and Public Administration, West University of Timisoara, Romania - Faculty of Economics and Business Administration, vol. 14(24), pages 61-66, October.
    • Handle: RePEc:scm:ejafbu:v:13:y:2020:i:23:p:61-66
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    References listed on IDEAS

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    1. Myron J. Gordon & Eli Shapiro, 1956. "Capital Equipment Analysis: The Required Rate of Profit," Management Science, INFORMS, vol. 3(1), pages 102-110, October.
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