On Monday, the Association for Financial Professionals issued its “2013 AFP Estimating and Applying Cost of Capital Survey Report.” The survey of 424 finance professionals found that although financial planning and analysis (FP&A) might be the department that makes the most use of weighted average cost of capital (WACC) figures, it is generally not the department responsible for coming up with WACC estimates. In 46 percent of respondents' companies, treasury is responsible for WACC calculations. This responsibility falls to finance in 32 percent of companies and to FP&A in only 18 percent.
More than half of respondents think their organization's WACC estimate is within 50 basis points (bps) of its actual cost of capital, but 11 percent believe the WACC is off by more than 100 bps. Large companies are three times as likely to think their WACC calculations are more than 1 percentage point away from actual cost of capital (see Figure 1).
Continue Reading for Free
Register and gain access to:
- Thought leadership on regulatory changes, economic trends, corporate success stories, and tactical solutions for treasurers, CFOs, risk managers, controllers, and other finance professionals
- Informative weekly newsletter featuring news, analysis, real-world case studies, and other critical content
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the employee benefits and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
