The long-term investments that make today will determine the value of business tomorrow. In order to make long-term investments in new product lines, new equipment and other assets, managers must know the cost of obtaining funds to acquire these assets. The cost associated with different sources of funds is called the cost of capital. . If the business earns more than its cost of capital, the market value of the business will increase. Likewise, if returns on long-term investments are below the cost of capital, market values will decline. Therefore, how we manage capital is extremely important to fulfilling the basic objective of increased shareholder value.
This report is basically concentrated on the topic of “Firm & Industry cost of capital”. And then there is an empirical analysis of cost of capital on pharmaceutical industry of Bangladesh by using the concept cost of capital & Statistical model. In Bangladesh the pharmaceutical sector is one of the most developed hi-tech sectors is contributing in the country's economy. There will be an extensive analysis on the pharmaceutical firm’s capital structure, their dividend payment pattern, their ROE in comparison with cost of equity and determining the factor that influencing the pharmaceutical company’s cost of capital largely.
BACKGROUND OF THE REPORT
Cost of capital is a very common phenomenon in a corporate world. It is essential to recognize whether the firm is maximizing its investor value or not. It is very hard to decide the required rate of return of investors of the company. For the purpose of determining the cost of capital of the firm and industry, Pharmaceutical industry has been chosen. This report will attempt to expose the following facts :
Introducing Cost of Capital basics. Capital structure and Dividend policy overview of the pharmaceutical companies. The equity and assets beta of the pharmaceutical companies. Industry Cost of capital the pharmaceutical sector of... [continues]
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(2009, 11). Cost of Capital. StudyMode.com. Retrieved 11, 2009, from http://www.studymode.com/essays/Cost-Of-Capital-259932.html
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