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Purpose: This publication aims to verify whether Van Horne coefficient model affects company growth, as expressed by the WACC. Design/methodology/approach: The study was conducted on a group of nonfinancial companies listed on: the Warsaw Stock Exchange (WIG index), The Frankfurt Stock Exchange (DAX index), The Paris Stock Exchange (CAC index) and the Stockholm Stock Exchange (OMX Stockholm index) from 01/01/2000-31/12/2021. Van Horne's SGR model was used as an indicator of the sustainable growth of the firm. The analysis related to WACC and condition assessment of analysed companies is presented as OLS and panel models parameter estimations. The study was carried out using cross-sectional regression analysis and panel data. Several models were estimated using the OLS method, including different sets of independent variables. Findings: In the analysis, it was found that the VSGR coefficient has a negative impact on the WACC for companies from all the analysed markets, i.e. the better the implementation of the company's sustainable development policy measured by the VSGR index, the lower the WACC of the company may record. These results were also not confirmed in panel studies with fixed effects, which allows us to conclude that these relationships are very weak. Research limitations/implications: Further research should expand the analysis of firms by size and stage of development considering value growth. In the next research stage, more extensive analysis and robustness tests will be performed to address endogeneity issues such as measurement errors, confounding factors, simultaneity, etc., and the analysis will be performed using panel data with observations over time. Practical implications: The results of the analysis can support the managers of companies in making decisions aimed at increasing the company's value in conditions of sustainable growth. Originality/value: The study's novelty is to establish the relationship between the company's sustainable development policy measured by the VSGR index and the weighted average cost of capital. [ABSTRACT FROM AUTHOR]

Hydrogen plays a pivotal role in transitioning to CO 2 -free energy systems, yet challenges regarding costs and sourcing persist in supplying Europe with renewable hydrogen. Our paper proposes a simulation-based approach to determine cost-optimal combinations of electrolyser power and renewable peak power for off-grid hydrogen production, considering location and energy source dependencies. Key findings include easy estimation of Levelized Costs of Hydrogen (LCOH) and optimal plant sizing based on the regional energy yield and source. Regional investment risks influence the LCOH by 7.9 % per 1 % change of the Weighted Average Cost of Capital. In Central Europe (Austria), hydrogen production costs range from 7.4 €/kg to 8.6 €/kg, whereas regions like Chile exhibit cheaper costs at 5.1 €/kg to 6.8 €/kg. Despite the favourable energy yields in regions like Chile or the UAE, domestically produced hydrogen can be cost-competitive when location-specific risks and transport costs are taken into account. This underlines the critical role of domestic hydrogen production and cost-effective hydrogen transport for Europe's future hydrogen supply. [Display omitted] • The cost-optimal plant sizing for off-grid hydrogen production was identified. • The site-specific renewable energy yield is an indication of the expected LCOH. • Investment risk and H 2 transport are crucial to the cost-efficient H 2 supply. • Transporting H 2 by ship is more cost-intensive than transporting it by pipeline. [ABSTRACT FROM AUTHOR]

This paper reviewed relevant empirical studies that examined the effect of information asymmetry (IA) on corporate cost of capital (COC) over seventeen years (2007 -2023). Critical/integrative review approach was adopted and the paper found that results obtained by the reviewed studies regarding the impact of IA on COE or WACC are in two sets: positive and negative. However, most of them have agreed and corroborated one another on the positive effect of IA on COE or WACC. And, this goes in line with the basic argument of the pecking order theory in its first proposition. Also, regarding IA and COD, the reviewed studies have agreed that IA positively affects COD. Other findings of the paper are that most of the reviewed studies were carried out in Asia, focusing on non-financial firms. Moreover, most of the studies assessed IA's effect on COE by employing Bid-ask spread and Eastos's (2004) PEG ratio models as common measures. Based on the summary of major findings, the paper concluded that corporate firms will be experiencing a rise in financing cost as long as there is an increase in asymmetric information in the capital market. The increase will affect equity financing, debt financing and overall financing costs. Thus, in line with the conclusions drawn, the paper recommended that corporate firms should strive to minimize the level of IA in the capital market through a commitment to providing high-quality financial reports that furnish the capital providers with relevant, reliable and comprehensive information.

One of the most popular methods to measure the performance and success of the company has become the economic value added. EVA supports strategic planning, and management can measure and evaluate performance at the division level. Through it, you can find results that are important not only for the company's management and the owners but also for the company's shareholders. For businesses in the market, it is essential to measure and evaluate the performance of the business, as they are exposed to the risk of competition and, of course, pressure from the environment. However, many companies are underestimating this measurement due to time-consuming and evaluating business performance based on financial statements. Therefore, they can only assess traditional indicators, often insufficient to determine the company's performance. The paper aims to inform readers about all necessary information related to the EVA method and draw the calculation on a specific example. We have determined the application of the method to a particular company as our primary goal. Therefore, we can get information on the performance of the selected company. The applied values and data are further applied and interpreted, which results in how the company manages its assets and how it can continue to improve its performance.

Our model indicates that European firms across all size categories use trade credits to purchase 6%–15% of tangible fixed assets and 14%–30% of intangible assets in the short-run. A long-run target adjustment model shows that large firms eventually replace most of this temporary trade credit financing with cheaper sources of funds. However, even in the long-run, small firms finance 4%–6% of tangible fixed asset purchases and 5%–10% of intangible fixed asset purchases using trade credit. Since smaller firms do not have the same access to bank credit as larger firms, trade credit is used to fund long-term investments Trade credit is therefore a key component in the capital structure decisions of smaller firms and it should be included in their weighted-average cost of capital calculations.

Based on the theoretical mechanism that 'financing constraints (investment-cash flow sensitivity) → capital misallocation → firm's total factor productivity' and ADL(2,2) model, implied cost model, total factor productivity model, panel regression model and mediation effect model, we empirically investigate the impact of financing constraints on TFP loss and the mediating effect of capital misallocation. Finance and market transaction data for manufacturing companies listed on Shanghai and Shenzhen stock exchanges during 2009–2019 are used in the empirical study. Chinese manufacturing companies were shown to have investment-cash flow sensitivity. The empirical analysis proved that financing constraints not only have direct negative impact on the firm's TFP directly but also negatively affect the TFP by the mediating effect of capital misallocation. Moreover, firm heterogeneity analysis showed that the above two impacts were greater for non-stated owned firms, small and medium-sized firms, and young firms than stated-owned firms, big firms and mature firms. [ABSTRACT FROM AUTHOR]

The article presents the effect of the financial discount rate on key financial indicators in the cost-benefit analysis used in the assessment of public investment projects - financial net present value, financial internal rate of return and financial gaps. It then estimates the Weighted Average Cost of Capital as an alternative approach for determining the discount rate. The model builds on the debt/equity ratio in the overall project investment portfolio and Capital Asset Pricing Model based on: (1) the return gained from investment in risk-free instruments; (2) the risk premium for the state (the so-called asymmetric state-related risk); (3) the business risk premium; (4) the project asymmetric risk premium. The model is then applied to an environmental investment project in Bulgaria. [ABSTRACT FROM AUTHOR]

The goal of this study is to optimize a company's capital structure by modelling and programming the required equations in the components of weighted average cost of capital. This process will be carried out in the programming language Python, and then Monte Carlo simulation will be applied to increase the number of combinations of debt and equity in the capital structure and obtain more accurate results on the Qatar gas transport company. Throughout various scenarios and outcomes, the study seeks to determine the ideal capital structure that reduces both the firm's weighted average cost of capital and the risk to which the Qatar gas transport company will be exposed. The suggested method offers a practical instrument for managers and investors to make well-informed decisions when they apply financial strategies to optimize the company's financial performance. Debt and equity are considered the main parts in the capital structure in every company, and if we can solve the problems connected to these two parts, we can optimize performance. The code of the programming language (Python) used in this study depends on logical discussion to compare different results. This research also will pay attention to the whole probabilities of debt and equity ratios in the Qatar Gas Transport Company. This research considers more variables in the analysis to obtain more accurate results about the firm's financial status. The results in this research show that the cost of capital in the Qatar Gas Transport Company will be reduced to 5% (currently 6%) if the percentage of debt and equity in the capital structure is changed to 79% and 21%, respectively. In comparison with the other 9999 components of capital structure, this ratio (79%, 21%) will be the optimal one. The scatterplot reflects that the more repeated values of weighted average cost of capital were located around the value of 5%. This fact can enable us to conclude that the minimum value of WACC is 5%, even though there are lower values of WACC than 5%, but at a lower frequency than that of values of 5%. The study's results are anticipated to introduce additional findings to help other authors to understand the mechanism of optimizing the capital structure and reduce the risk in the gas and oil sector. [ABSTRACT FROM AUTHOR]

The blueberry industry is growing significantly in Colombia. For investors, cost analysis plays a key role in project planning for any agribusiness. This paper is an exploratory study, with a descriptive scope to identify components of establishment and production costs of growing blueberries in Colombia. Data were collected and analyzed from a project aimed at establishing a 1 ha blueberry crop in Zipaquirá and 18 blueberry small farms in the Cundiboyacense highlands. Components were applied to estimate the capital investment and to identify the establishment, production, and maintenance costs of this project. Decision investment analysis, including discount rates for the capital asset pricing model (CAPM), were used to compute the net present value (NPV), internal rate of return (IRR), and the return on investment (ROI). Production costs are still expensive due to the Colombian peso (COP) exchange rate compared to the US dollar (USD). Results show advantages for promoting the establishment of blueberry crops because of suitable climatic conditions for continuous production throughout the year in Colombia. Labor costs and utilities are cheaper compared to other countries and represent a competitive advantage in the investment. Intermediation suppliers affect establishment costs for commercial reasons. Blueberry production cost analysis in Colombia may facilitate agribusinesses to promote projects in Colombian agriculture.

One of the most popular methods to measure the performance and success of the company has become the economic value added. EVA supports strategic planning, and management can measure and evaluate performance at the division level. Through it, you can find results that are important not only for the company's management and the owners but also for the company's shareholders. For businesses in the market, it is essential to measure and evaluate the performance of the business, as they are exposed to the risk of competition and, of course, pressure from the environment. However, many companies are underestimating this measurement due to time-consuming and evaluating business performance based on financial statements. Therefore, they can only assess traditional indicators, often insufficient to determine the company's performance. The paper aims to inform readers about all necessary information related to the EVA method and draw the calculation on a specific example. We have determined the application of the method to a particular company as our primary goal. Therefore, we can get information on the performance of the selected company. The applied values and data are further applied and interpreted, which results in how the company manages its assets and how it can continue to improve its performance. [ABSTRACT FROM AUTHOR]

After the 2008 global financial crisis, authorities across the globe stressed the importance of equity capital to absorb losses. While many countries have raised bank capital adequacy requirements (CARs), the comprehensive impact assessment of this policy for emerging economies remains largely unexplored. We use a financial computable general equilibrium (FCGE) model of Indonesia called AMELIA-F to investigate the economy-wide impact of a 100 basis points increase in the CAR of Indonesian banks. Bank balance sheets contract as they move away from holding riskier assets, aiding macroeconomic stability. However, both non-housing and housing investment contract as banks pass on higher funding costs, driving long-run real GDP below baseline. As we discuss, debt-to-equity ratios for these sectors, and the economy-wide private debt to income ratio all fall, thus aiding long-run macroeconomic stability. [ABSTRACT FROM AUTHOR]

Risk disclosure refers to providing information to the user to inform of any opportunities or threats .Theoretically, disclosure mainly aims to reduce the information asymmetry as well as investor uncertainty, thereby indirectly lowering the equity cost. An advantage of risk disclosure is its effectiveness in reducing the equity cost. Therefore, risk disclosure can help decrease investor uncertainty, thus diminishing the equity cost. This project mainly investigates the relationship between risk reporting and cost of capital in 174 firms listed on the Tehran Stock Exchange for the period 2012-2018. This is an applied research study in terms of purpose and descriptive-correlational in terms of methodology. In this study, the variable of risk disclosure was collected by analyzing the content of financial statements, explanatory notes, and board of director reports. The cost of capital was calculated in three ways: cost of debt, cost of ordinary shares, and weighted average cost of capital (WACC). Thus, the relationship between risk disclosure and cost of capital was examined in the form of three individual hypotheses. The results demonstrated no significant relationship between risk disclosure and cost of debt; therefore, the first hypothesis is rejected. It was also suggested that there is a statistically significant negative relationship between risk disclosure and cost of common equity; thus, the second hypothesis was confirmed. Finally, risk disclosure appeared to have a statistically significant negative relationship with WACC; therefore, the third hypothesis was confirmed.

Modern approaches to assessing the cost of capital of a company in order to choose the most successful structure are considered. The SARM model for estimating the cost of equity is described in detail. The indicator of economic value added was proposed as a criterion of economic efficiency. Modern approaches to assessing the value of a company are reflected, financial instruments and market indices used to assess the cost of capital of companies are studied. The hypothesis of the relationship between the capital structure and value was also evaluated and confirmed on the example of an operating oil and gas company, taking into account the actual results of its activities and industry characteristics.

The goal of this study is to optimize a company’s capital structure by modelling and programming the required equations in the components of weighted average cost of capital. This process will be carried out in the programming language Python, and then Monte Carlo simulation will be applied to increase the number of combinations of debt and equity in the capital structure and obtain more accurate results on the Qatar gas transport company. Throughout various scenarios and outcomes, the study seeks to determine the ideal capital structure that reduces both the firm’s weighted average cost of capital and the risk to which the Qatar gas transport company will be exposed. The suggested method offers a practical instrument for managers and investors to make well-informed decisions when they apply financial strategies to optimize the company’s financial performance. Debt and equity are considered the main parts in the capital structure in every company, and if we can solve the problems connected to these two parts, we can optimize performance. The code of the programming language (Python) used in this study depends on logical discussion to compare different results. This research also will pay attention to the whole probabilities of debt and equity ratios in the Qatar Gas Transport Company. This research considers more variables in the analysis to obtain more accurate results about the firm’s financial status. The results in this research show that the cost of capital in the Qatar Gas Transport Company will be reduced to 5% (currently 6%) if the percentage of debt and equity in the capital structure is changed to 79% and 21%, respectively. In comparison with the other 9999 components of capital structure, this ratio (79%, 21%) will be the optimal one. The scatterplot reflects that the more repeated values of weighted average cost of capital were located around the value of 5%. This fact can enable us to conclude that the minimum value of WACC is 5%, even though there are lower values of WACC than 5%, but at a lower frequency than that of values of 5%. The study’s results are anticipated to introduce additional findings to help other authors to understand the mechanism of optimizing the capital structure and reduce the risk in the gas and oil sector.

In the regulation of network tariffs, the compensation for the opportunity costs of capital through the Weighted Average Costs of Capital (WACC) plays a crucial role. Determining the appropriate level for the WACC is, though, problematic because of the uncertainty about the future conditions in capital markets. When the WACC is set above the future opportunity costs of capital, consumers will pay too much, while when the WACC is below that level, network operators may be unable to finance investments affecting quality of network services. In this paper, we explicitly take this uncertainty into account when we determine the optimal WACC for the tariff regulation of an electricity network. By trading off consumer surplus and expected disruption costs in the electricity grid, we conclude that from a social-welfare perspective in most cases the optimal WACC in tariff regulation is above the historical mean costs of capital. Only in case of high uncertainty about the true costs of capital while network operators are able to quickly increase investment levels, the optimal WACC is below the historical mean because then it is less likely that the WACC is constantly insufficient to cover actual costs of capital. However, when network operators cannot quickly increase investment levels the optimal WACC is always above the historical mean cost of capital. [ABSTRACT FROM AUTHOR]

Purpose: This paper explores the practical issues of information asymmetry as it pertains to the methods of valuation of high-tech platform-based corporations. The paper touches upon the theoretical discussion of the issues of asymmetry and valuation techniques and summarizes some of the published literary work on these issues, without engaging in an indepth discussion. Design/Methodology/Approach: The methodology consists of an analysis and comparison/contrast between supply, demand platform companies ((SDPs) with industry incumbents on: capital structure, weighted average cost of capital (WACC), working capital and liquidity management, and enterprise risk structure and management strategy as they pertain to discounted cash flows and multiples valuation techniques. Tables showcasing various types of financial data such as: assets and liabilities, equity, market capitalization, debt to equity and current ratios are utilized in making the comparisons and drawings conclusions. Findings: The research shows that the peculiar and complicated structure, the ability to raise funds, the initial high profit margins and the explosive growth rates of companies such as: WeCo, Uber, B2B, Netflix and others, lead to overvaluation when the traditional valuation models are utilized. Practical implementations: The study concludes by recommending alternative valuation models that utilize some of the specific findings of previous researchers on assessing terminal value, estimating cost of capital, and capital expenditures to address some of the peculiarities of the SDPs and adding to the rubrics and scorecards to account for nonfinancial factors such as switching costs, brand recognition and other intangibles. The inclusion of these would lead to an improved valuation of these types of companies and reduce the overall risk exposure of financial intermediaries that provide funding. Originality value: The audience for this type of research are: financial advisors, stock analysts and investors who appreciate the challenges that information asymmetry and uncertainty present in their efforts to correctly value stock and IPOs in this high-tech subsector. [ABSTRACT FROM AUTHOR]

Copyright of Saber, Ciencia y Libertas is the property of Saber, Ciencia y Libertad and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Nowadays the Weighted average cost of capital indicator plays an important role in assessing the financial and economic situation of Russian companies. This article describes a detailed algorithm for calculating this indicator using the example of the four largest Russian companies. The dynamics of the Weighted average cost of capital under the conditions of the anti-Russian sanctions are considered and conclusions are drawn about the role of this indicator and the prospects for the development of Russian companies in the conditions of a new market situation.

This article analyzes the formulation of the “weighted average cost of capital” in the manuals of two of the most influential associations of financial analysts. It focuses on the use of the formula as the discount rate to determine the “fundamental value” of listed companies using the “discounted cash flows” method, a cornerstone of the definition of “shareholder value” used in the finance industry worldwide. It shows that the choice of variables and their mathematical relations in the formula mobilize multiple, partly independent and contradictory epistemologies and ontologies. This multiplicity is assembled along political imaginaries concerning the relation between particular notions of the maximizing investor, the efficient markets and the sovereign state. The figure of the investor is considered the only legitimate agent to claim the “free” cash flows of the company, the efficient markets are considered the source of truthful representation of value, and the state is supposed to guarantee both the fair play between investors and a minimum revenue for money owners, to be extracted from the rest of society through the tax system. The formula thus legitimizes and renders self-evident power relations that sustain the global inequalities produced by the finance industry.

Risk disclosure refers to providing information to the user to inform of any opportunities or threats. Theoretically, disclosure mainly aims to reduce the information asymmetry as well as investor uncertainty, thereby indirectly lowering the equity cost. An advantage of risk disclosure is its effectiveness in reducing the equity cost. Therefore, risk disclosure can help decrease investor uncertainty, thus diminishing the equity cost. This project mainly investigates the relationship between risk reporting and cost of capital in 174 firms listed on the Tehran Stock Exchange for the period 2012-2018. This is an applied research study in terms of purpose and descriptive-correlational in terms of methodology. In this study, the variable of risk disclosure was collected by analyzing the content of financial statements, explanatory notes, and board of director reports. The cost of capital was calculated in three ways: cost of debt, cost of ordinary shares, and weighted average cost of capital (WACC). Thus, the relationship between risk disclosure and cost of capital was examined in the form of three individual hypotheses. The results demonstrated no significant relationship between risk disclosure and cost of debt; therefore, the first hypothesis is rejected. It was also suggested that there is a statistically significant negative relationship between risk disclosure and cost of common equity; thus, the second hypothesis was confirmed. Finally, risk disclosure appeared to have a statistically significant negative relationship with WACC; therefore, the third hypothesis was confirmed. [ABSTRACT FROM AUTHOR]

This research aims at investigating the effect of firms' environmental policies on the weighted average cost of capital (WACC) in order to catch capital markets' reaction towards corporate environmental commitment and effectiveness in reducing carbon emissions. We refer to the European market and analysed a sample of companies listed on the Stoxx Europe 600 Index during the timeframe 2014–2018. Our results show that capital markets have become particularly sensitive to environmental issues and therefore reward environmentally virtuous firms with a lower after tax WACC. We also argue that this effect is prominent for both high emitting and low emitting industries. [ABSTRACT FROM AUTHOR]

We examine the association between the disclosure requirements of the International Financial Reporting Standards (IFRS) and the cost of capital for a sample of Australian firms. We find that these disclosure requirements have a negative association with the cost of capital. The interpretation is that firms with a higher level of IFRS disclosure have a lower cost of capital. Further analysis shows that IFRS disclosure requirements are negatively related to the cost of debt and equity capital. Our findings contribute to the debate on the relative costs and benefits of IFRS disclosure requirements and have important implications for standard setters, regulators and users of financial statements. [ABSTRACT FROM AUTHOR]

This article analyzes the formulation of the "weighted average cost of capital" in the manuals of two of the most influential associations of financial analysts. It focuses on the use of the formula as the discount rate to determine the "fundamental value" of listed companies using the "discounted cash flows" method, a cornerstone of the definition of "shareholder value" used in the finance industry worldwide. It shows that the choice of variables and their mathematical relations in the formula mobilize multiple, partly independent and contradictory epistemologies and ontologies. This multiplicity is assembled along political imaginaries concerning the relation between particular notions of the maximizing investor, the efficient markets and the sovereign state. The figure of the investor is considered the only legitimate agent to claim the "free" cash flows of the company, the efficient markets are considered the source of truthful representation of value, and the state is supposed to guarantee both the fair play between investors and a minimum revenue for money owners, to be extracted from the rest of society through the tax system. The formula thus legitimizes and renders self-evident power relations that sustain the global inequalities produced by the finance industry. [ABSTRACT FROM AUTHOR]

Cost of capital is an important driver of investment decisions, including the large investments needed to execute the low-carbon energy transition. Most models, however, abstract from country or technology differences in cost of capital and use uniform assumptions. These might lead to biased results regarding the transition of certain countries towards renewables in the power mix and potentially to a sub-optimal use of public resources. In this paper, we differentiate the cost of capital per country and technology for European Union (EU) countries to more accurately reflect real-world market conditions. Using empirical data from the EU, we find significant differences in the cost of capital across countries and energy technologies. Implementing these differentiated costs of capital in an energy model, we show large implications for the technology mix, deployment, carbon emissions and electricity system costs. Cost-reducing effects stemming from financing experience are observed in all EU countries and their impact is larger in the presence of high carbon prices. In sum, we contribute to the development of energy system models with a method to differentiate the cost of capital for incumbent fossil fuel technologies as well as novel renewable technologies. The increasingly accurate projections of such models can help policymakers engineer a more effective and efficient energy transition. [ABSTRACT FROM AUTHOR]

We propose new models for analyzing changes in the value of the company using stochastic discount rates. It is shown that for the majority of the companies under study, local changes in the rate of the company value growth (percentage changes to the previous level) are not explained by the corresponding changes neither in the weighted average cost of capital (WACC), nor in the cash flows. This fact, as well as the research results by J. Cochrane, who proved that discount rates volatility is the main contributor to price volatility, became initial prerequisites for building models based on stochastic discount rates. The work presents three models built on stochastic discount rates, where cash flows are assumed to be growing with a certain trend, and the factors affecting the price of the company are described by stochastic discount factors. These models are alternative in relation to the commonly used traditional cash flow discounting (DCF) models where the free cash flow is discounted through the WACC, or the free flow to capital at the opportunity cost of equity. The first model is used to analyze the dependence of the company value on investments. It uses free cash flow subject to zero growth. The second model uses net cash flow from operating activities plus interest, minus the minimum investment subject to zero growth. The third model uses net cash flow from operating activities plus interest adjusted to taxes. This model requires to estimate the rates of the company downsizing subject to zero investment. The third model is applicable for companies with volatile investments, where it is difficult to reliably estimate free cash flow in case of zero growth. The models are designed for analysis of the factors influencing the value of the company for value-based management. Another application of the models is the evaluation of investment value of the company and the answer to the question of its possible overestimated or underestimated value. The third way to apply this model is the empirical evaluation of the weighted average cost of capital applicable to the company’s investment projects, alternative to WACC, assessed by standard methods.

The company's stock price which always experiences a decline is the background of this research. This study aims to determine the effect of return on equity (ROE) and Weighted Average Cost of Capital (WACC) on firm value in the textile and garment sector which is listed on the Indonesia Stock Exchange. This study using secondary data from is Financial statements of textile and garment companies from 2013 to 2018 obtained through the website Indonesia Stock Exchange. The analytical method used is multiple linear regression and data analysis using IBM Statistics 26. Based on the result of the analysis it can be concluded that return on equity and weighted average cost of capital has a significant effect on firm value with R2 equal to 0,329, which means the contribution of the independent variable to firm value by Price book value (PBV) in textile and garment companies is equal to 32,9 % and the remainder equal to 68,1 % can be explained by other variables outside this study, and based on the value of F with the values 6.606 shows that the simultaneous correlations of independent variables namely ROE and WACC with the dependant variable firm value.

Using the example of a diversified industrial enterprise, there developed an approach to evaluating the prospects of the implementation of an innovation and investment project on manufacturing a product under conditions of an undeveloped sales market as well as associated risks. It is substantiated that the project can be promising due to its social significance manifested in obtaining environmental, social, and environmental effect from it realization. To evaluate alternative investment projects, there developed a methodological approach that implies analysis according to the following scheme: volume of the market for the product, designed capacity and production technology, competitive environment; characteristics of consumers. This will allow to demonstrate the advantages and disadvantages of each of the alternative projects at the initial stage of the study. The effectiveness and expediency of the project implementation should be evaluated by the following indicators: payback period (PP), accounting rate of return (ARR), net present value (NPV), profitability index (PI), discounted payback period (DPP), internal rate of return (IRR). When making the decision about the implementation of a particular project, its social effect as well as the forecast of future cash flows reflecting changes in their value over time with regard to the discount rate should be taken into account. In developing markets, it is most appropriate to take for the discount rate the weighted average cost of capital, which is calculated in accordance with the CAPM model using the central bank discount rate as risk-free rate, and to calculated the risk premium using the methodology developed by A. Damodaran, based on the data on the country’s credit rating by Moody’s. The identification of the main risks of the project is possible by conducting an expert survey providing for the evaluation of importance and probability of occurrence of individual risk. The subjectivity of an expert survey has to be reduced by identifying the main mental traps. A more in-depth study of an impact of each risk has to be conducted by using the VaR concept and analysing the sensitivity of impact of simultaneous two risks to the net present value of the project.

The article deals with to the critical analysis of the internal rate of return, which represents one of the traditional most frequently used indicators of financial effectiveness of investment projects, allowing investors to sense relative yield from investing in a project. Within the analysis the author identifies deficiencies of applying the internal rate of return and offers alternative means of practical evaluation of relative yield from investing in a project based on modelling of an investor’s behavior related to expected schedule of return invested capital.

The foundation for future firm development is investment. Agents have a risk aversion requiring higher returns as the risks associated with the project will be greater. The investment decision determines the market firm's affirmation, increasing the market share, dominating the market. Making an investment at a certain point will determine certain cash flows throughout the life of the project, and a residual value can be obtained when it is taken out of service. The flows and payments for the investment project can be more easily tracked if we are proposing a constant update rate. We will be able to analyze, based on various factors, three techniques for determining the discount rate for investment projects: the opportunity cost, the risk-free rate, and a series of risk premiums, the weighted average cost of capital. People without financial training make value judgments for investment projects based on other market opportunities, comparing the returns that any investment offers to other pay options. An investor has a sum of money he wants to make - if he does not invest in a project, he will invest in another, that will bring him a certain amount of money, choosing the most advantageous project by comparison. All projects are characterized by identical risks, and the agents are considered indifferent to the risks. The answer given by financial theory and practice to the disadvantage of rates in the opportunity cost category is the discount rate calculated as a sum of the risk-free rate and a risk premium, defining the risk as a factor whose action may cause a possible decrease in cash of the available flows. Higher objectivity is presented by the opportunity cost update rates of update because it refers to known variables but cannot be perfectly matched to the performance of the investment process.

The critical analysis of the net present value, which represents one of the traditional most frequently used indicators of financial effectiveness of investment projects has been proved. Net present value is also considered as a base for fair value estimate of intangible assets on a company’s balance sheet. Within the analysis the answers to questions of every investor are given: how to correctly assess the net present value, what discount rate is better applied for cash flows and how to estimate the discount rate, whether an investor should immediately reject the project having a negative net present value, how to estimate weighted average cost of capital correctly and others.

We examine the relation between implied cost of capital and expected returns under an assumption that expected returns are stochastic, a property supported by theory and empirical evidence. We demonstrate that implied cost of capital differs from expected return, on average, by a function encompassing volatilities of, as well as correlation between, expected returns and cash flows, growth in cash flows, and leverage. These results provide alternative explanations for findings from empirical studies employing implied cost of capital on the magnitude of the market risk premium; predictability of future returns; and the relations between cost of capital and a host of firm characteristics, such as growth, leverage, idiosyncratic risk and the firm’s information environment.

In this study, the relationship between weighted average cost of capital (as one of the economic approach to assess the performance) with intellectual capital was studied. In order to compute intellectual capital Value-Added Intellectual Coefficient (VAIC) model and to compute weighted average cost of capital (WACC) Gordon model were used. Statistical sample consists of 80 companies and 380 company-year observations for period of 2010 till 2014. To examine the relationship between independent and dependent variables linear regression model and to perform calculations and data analysis Excel, SPSS and Eviews have been used. The results showed that in the case of banks the relationship between human capital efficiency (HCE), structural capital efficiency (SCE), and intellectual capital efficiency (ICE) with weighted average cost of capital (WACC) is positive and significant. So, intellectual capital caused an increase in company wealth and a decrease in the cost of capital. While relationship among capital employed efficiency (CEE) and weighted average cost of capital (WACC) regardless of positive or negative relationship coefficient is not significant. Also, in the case of both banks and companies, the relationship between human capital efficiency (HCE), intellectual capital efficiency (ICE) and capital employed efficiency (CEE) with weighted average cost of capital (WACC) regardless of positive or negative relationship coefficient is not significant. In other words, intellectual capital did not lead to an increase in company’s wealth. While relationship between structural capital efficiency (SCE) and weighted average cost of capital (WACC) is positive and significant. Also, the results showed that the relationship between value-added intellectual coefficient (VAIC) with intellectual capital efficiency (ICE) is positive and significant. The correlation coefficient in banks was 0.99 and correlation coefficient for both banks and companies calculated to be 0.94. Therefore, intellectual capital causes an increase in value-added intellectual coefficient

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Copyright of Revista Espacios is the property of Talleres de Impresos Oma and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

The paper represents a first exploratory study based on the comparison between the Weighted Average Cost of Capital (WACC) of a sample of companies listed on Malaysian Stock Exchange, classified and shared according to the principles of Islamic finance (i.e. riba, risk sharing, haram). In particular, the main aim of the analysis is to provide some evidences of the potential effect on the risk (measured by beta) on the WACC as result of the principles used to divide the companies between Shari’ah Compliant and not Shari’ah Compliant. Generally our findings are focused on a greater level of WACC related to the LCSC that belong to the majority of selected sectors and, according to the principles of Islamic finance, they have shown a leverage ratio lower than that of companies not Shari’ah Compliant.