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Why Sit on All that Cash? Firms Uncertain on Cost of Capital

Harvard Business Review

With a record $2 trillion in cash and short-term liquid assets on hand, U.S. Many are deeply uncertain about which initiatives they should fund — and one root of this indecision is a general lack of confidence in the cost of capital projections they are using to make the call. We find that 55 percent of respondents are convinced their cost of capital estimates are off by more than 50 basis points.

Still Many Ways to Skin a Capital Cost

Harvard Business Review

When executives evaluate a potential investment, whether it's to build a new plant, enter a new market, or acquire a company, they weigh its cost against the future cash flows they expect will spring from it. To make sure they're comparing apples to apples, they discount those future cash flows to arrive at their net present value. It's the opening paragraph of a Harvard Business Review article called "What's Your Real Cost of Capital?"

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What Private Equity Investors Think They Do for the Companies They Buy

Harvard Business Review

We also know that private equity funds have outperformed public equity markets over the last three decades , even after the fees they charge are accounted for. PE firms typically buy controlling shares of private or public firms, often funded by debt, with the hope of later taking them public or selling them to another company in order to turn a profit. Private equity as we define it in this paper does not include venture capital investments.).