(v5005.00) Long-Term Cost of Capital (%)

The Cost of Capital (v5000), or discount rate, is the weighted average of the costs of debt and equity.

The Long-Term Cost of Capital (v5005.00) is used in the residual value period. Using a cost of capital to calculate residual value allows you to assign different required rates of return to the post-planning horizon period and forecast period, increasing your flexibility in modeling the forecast period and residual value of the company.

Forecasting different costs of capital rates for different periods is not recommended, unless you expect the company to 1.) operate in businesses with substantially different risk in the future, or 2.) go through a period when its capital structure is suboptimal.

Enter this input item as a percentage.