Cost of Capital
(Expected Returns): Risk-free rate of return on US Treasury Bills + an
equity risk premium ascribed to each corporate equity.
Adage: A bad financing will not kill a good investing
decision but a good financing cannot rescue a bad investing decision.
Needless to say a bad financing will hasten the demise of a bad investing
decision - witness Robert Campeau's attempted takeover of Federated
Department Stores (see Retailing-Department Stores) with financing
provided by "Bid 'Em Up" Bruce Wasserstein (Wasserstein, Perella
- both ex of First Boston).
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