IDEAS home Printed from https://ideas.repec.org/a/khe/journl/v5y2013i2p157-161.html
   My bibliography  Save this article

Methods of Establishing Capital Costs

Author

Listed:
  • Gheorghe Suciu

    ()

  • Nicolae Barsan-Pipu

    () ("Dimitrie Cantemir" Christian University)

Abstract

Capital cost represents an important element in the orientation of investments on the market. The most important component when comparing the investment alternatives is risk, respectively the uncertainty level with which the investor will achieve the expected profitability in a certain period of time. Capital cost represents a direct link between the investments’ profitability and the profitability claimed by the capital bearers. Capital cost represents an acceptance or rejection indicator of an investment project, respectively of the investment decision. The cost of equity capital is equivalent to the level of profitability expected by the businesses’ financers, shareholders or creditors. The potential gain of the equity holder must be big enough to encourage them to buy stocks and also to keep them, a situation which is characterized by an estimated rate of return which covers the risks of the financial investment.

Suggested Citation

  • Gheorghe Suciu & Nicolae Barsan-Pipu, 2013. "Methods of Establishing Capital Costs," Knowledge Horizons - Economics, Faculty of Finance, Banking and Accountancy Bucharest,"Dimitrie Cantemir" Christian University Bucharest, vol. 5(2), pages 157-161, June.
  • Handle: RePEc:khe:journl:v:5:y:2013:i:2:p:157-161
    as

    Download full text from publisher

    File URL: http://orizonturi.ucdc.ro/arhiva/2013_khe_2_pdf/khe_vol_5_iss_1_157to161.pdf
    Download Restriction: no

    File URL: http://orizonturi.ucdc.ro/arhiva/2013_khe_2_pdf/khe_vol_5_iss_1_157to161.pdf
    Download Restriction: no

    More about this item

    Keywords

    Capital cost; opportunity cost; actual annual cost; ownership equity; loaned capital;

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:khe:journl:v:5:y:2013:i:2:p:157-161. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Adi Sava). General contact details of provider: http://edirc.repec.org/data/ffucdro.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.