Cost of Capital and Business Financing: Strategic Implications for Corporate Financial Management

Abstract

This article explores the critical role of the cost of capital in business financing decisions. It investigates the components and measurement of the cost of capital, its impact on investment and financing choices, and how businesses optimize capital structures to minimize overall financing costs. The paper also analyzes the relationship between market conditions, risk, and the cost of capital. Drawing on empirical studies and theoretical frameworks, this research highlights how understanding and managing the cost of capital contributes to firm value maximization, risk mitigation, and sustainable growth.