The Influence of Company's Capital Cost on Investment Decision

• Main Author: Dorina Emilia TOMA
• Format: Article
• Language: English
• Published: Dunarea de Jos University of Galati 2014-08-01
• Series: Annals of Dunarea de Jos University. Fascicle I : Economics and Applied Informatics
• Online Access: http://www.eia.feaa.ugal.ro/images/eia/2014_1/Toma.pdf

This paper is aimed at highlighting the importance of the cost of capital as a discount rate of investment in making an investment decision in the ROMNAV Braila company. This study carefully puts forward the existence of four possible cases to which companies may belong: unlevered and investments to maintain the productive capacity will be made; indebted and investments to maintain the productive capacity will be made; unlevered and new investments will be undertaken and indebted and new investments will be undertaken. The results of the study show that the average cost of capital is higher when the company turns to debt; the market value of the company is higher when it is indebted and new investments will be made and the cost of capital can be used as a discount rate of the company assessment.