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Cost of capital

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The cost of capital is important to capital decision making and any manipulation on cost of capital will affect to the situation of any company. Discuss the importance of cost of capital with respect to the actual financial problem of most manufacturing companies.

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The solution discusses how the cost of capital and manufacturing accounting.

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In manufacturing, capital such as equipment is directly related to the output of the campany in most cases. When a company finds that demand for its product is growing, it will want to increase its output in order to meet this demand, maintain its market share, and increase profitability. But, before the income from the increased production can be realized, the firm must first purchase the equipment. This is then the financial ...

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