Cost-of-Capital in Managerial Finance: An Examination of Practices in the German Real Economy Sector (Contributions to Management Science)

This book examines cost-of-capital models and their application in the context of managerial finance. This includes the use of hurdle rates in capital allocation decisions, as well as target returns in performance management. Besides a review of classical finance models such as the Capital Asset Pricing Model (CAPM), other contemporary models and techniques to determine the cost-of-capital of business units and private companies are discussed. Based on a mixed methods approach, current cost-of-capital practices and their determinants are empirically analyzed among German companies. This book examines cost-of-capital models and their application in the context of managerial finance. This includes the use of hurdle rates in capital allocation decisions, as well as target returns in performance management. Besides a review of classical finance models such as the Capital Asset Pricing Model (CAPM), other contemporary models and techniques to determine the cost-of-capital of business units and private companies are discussed. Based on a mixed methods approach, current cost-of-capital practices and their determinants are℗l empirically analyzed℗lamong German companies Front Matter....Pages i-xii Introduction....Pages 1-7 Background: Cost-of-Capital in the Finance Literature....Pages 9-70 Previous Results on Cost-of-Capital Practices....Pages 71-96 Research Philosophy and Ethics....Pages 97-106 Empirical Research Approach and Methods....Pages 107-116 Primary Research: Expert Interviews....Pages 117-146 Primary Research: Company Survey....Pages 147-213 Conclusion and Contribution to Knowledge....Pages 215-231 Appendix....Pages 233-245