1540-6261/asset/olbannerleft.gif?v=1&s=f5fa766df21c6468d114bb94916c51480b2eed9e)
1540-6261/asset/jofi_centre.gif?v=1&s=3be479aa919c797606665cb79e364d5eb71c8734)
The Corporate Cost of Capital and the Return on Corporate Investment
Article first published online: 17 DEC 2002
DOI: 10.1111/0022-1082.00178
The American Finance Association 1999
1540-6261/asset/cover.gif?v=1&s=5192ce61b1e4bde927ebc2df55b44b4da55ef137 "The Journal of Finance")
Additional Information
How to Cite
Fama, E. F. and French, K. R. (1999), The Corporate Cost of Capital and the Return on Corporate Investment. The Journal of Finance, 54: 1939–1967. doi: 10.1111/0022-1082.00178
Publication History
- Issue published online: 17 DEC 2002
- Article first published online: 17 DEC 2002
- Abstract
- Cited By
We estimate the internal rates of return earned by nonfinancial firms on (i) the initial market values of their securities and (ii) the cost of their investments. The return on value is an estimate of the overall corporate cost of capital. The estimate of the real cost of capital for 1950–96 is 5.95 percent. The real return on cost is larger, 7.38 percent, so on average corporate investment seems to be profitable. A by-product of calculating these returns is information about the history of corporate earnings, investment, and financing decisions that is perhaps more interesting than the returns.