Abstract

http://ssrn.com/abstract=75999
 
 

References (6)



 
 

Citations (32)



 


 



The Corporate Cost of Capital and the Return on Corporate Investment


Eugene F. Fama


University of Chicago - Finance

Kenneth R. French


Dartmouth College - Tuck School of Business; National Bureau of Economic Research (NBER)

April 1998

CRSP Working Paper

Abstract:     
We estimate two internal rates of return for the non-financial corporate sector: (i) the return on the initial market values of the securities issued by firms, and (ii) the return on the cost of their investments. The return on cost is the return delivered by firms on investment outlays. The return on value is an estimate of the overall corporate cost of capital, that is, the return on investment required by the capital market. The estimate of the corporate cost of capital for 1950-96 is 10.72 percent. The return on cost is larger, 12.11 percent, so on average corporate investment seems to be profitable. A byproduct of calculating these returns is information about the history of corporate earnings, investment, and financing decisions that is perhaps more interesting than the returns themselves.

Number of Pages in PDF File: 31

JEL Classification: G30

working papers series





Download This Paper

Date posted: August 11, 1998  

Suggested Citation

Fama, Eugene F. and French, Kenneth R., The Corporate Cost of Capital and the Return on Corporate Investment (April 1998). CRSP Working Paper. Available at SSRN: http://ssrn.com/abstract=75999 or http://dx.doi.org/10.2139/ssrn.75999

Contact Information

Eugene F. Fama (Contact Author)
University of Chicago - Finance ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-7282 (Phone)
773-702-9937 (Fax)
Kenneth R. French
Dartmouth College - Tuck School of Business ( email )
Hanover, NH 03755
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Feedback to SSRN


Paper statistics
Abstract Views: 19,458
Downloads: 7,356
Download Rank: 368
References:  6
Citations:  32

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo6 in 0.281 seconds