article thumbnail

Still Many Ways to Skin a Capital Cost

Harvard Business Review

It's the opening paragraph of a Harvard Business Review article called "What's Your Real Cost of Capital?" They believed managers needed a better way to come up with a number to represent their cost of capital, and that's what they were presenting. That paragraph isn't my own writing. by James J. McNulty, Tony D.

CAPM 14
article thumbnail

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

Harvard Business Review

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.

Insiders

Sign Up for our Newsletter

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

article thumbnail

Providing Earnings Guidance? Think Again

Harvard Business Review

It's a question that has defied consensus, with valid arguments on both sides of the issue. Less Volatility in Stock Price: The net effect of providing guidance is arguably a less volatile stock price, which can result in a lower beta and a lower cost of capital. First, let's review the case for guidance. FD) constraints.

CFO 12
article thumbnail

What Your Stock Price Is Really Means

Harvard Business Review

You start by using analysts' reports and other sources to gauge the consensus expectations for value drivers — sales growth, operating profit margins, cost of capital and other factors that determine cash flows.

Price 8
article thumbnail

How Blockchain Is Changing Finance

Harvard Business Review

Money, equities, bonds, titles, deeds, contracts, and virtually all other kinds of assets can be moved and stored securely, privately, and from peer to peer, because trust is established not by powerful intermediaries like banks and governments, but by network consensus, cryptography, collaboration, and clever code.