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  • 2019 Fall: Volume 18, Issue 2
  • Estimating the Cost of Capital for Operating Assets

    • Timothy Vines ;
    • ChengHo Hsieh

    Use this link to view the PDF file: Estimating the Cost of Capital for Operating Assets

    Title:

    Estimating the Cost of Capital for Operating Assets

    Author(s):

    Timothy Vines and ChengHo Hsieh

    Publication Date:

    2019

    Journal Title:

    The Journal of Finance Issues

    Volume Number:

    18

    Issue Number:

    2

    Abstract:

    A firm’s total assets include non-operating and operating components. In the conventional value-based management and economic value-added models, the value created comes from the firm’s operating assets; therefore, the weighted average cost of capital in the models should also be based on the operating assets instead of the total assets. A method to find this cost of capital is presented. This modification also has implications for other areas in the study of financial management, such as capital budgeting and capital structure.

    First Page:

    52

    Last Page:

    60

    Total Pages:

    8