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Capital Is Expensive Again. Now What?

With growing interest rates, business managers need to allocate expenses towards long-term growth investments.

By Michael Mankins

First published on marzo 30, 2023
min read


This article originally appeared on HBR.org For most of the last 15 years, capital has been cheap. Since 2009, the after-tax cost of borrowing for some large companies has been below the rate of inflation, making their debt in real terms cost-free. And for much of this time, the stock market moved steadily upward, consistent with historically low costs of equity. We estimate that in early 2022, the weighted-average cost of capital (WACC) for the average company in the S&P 500 hovered below 6%. *Read the full article on HBR.org (subscription may be required).*

This article originally appeared on HBR.org

For most of the last 15 years, capital has been cheap. Since 2009, the after-tax cost of borrowing for some large companies has been below the rate of inflation, making their debt in real terms cost-free. And for much of this time, the stock market moved steadily upward, consistent with historically low costs of equity. We estimate that in early 2022, the weighted-average cost of capital (WACC) for the average company in the S&P 500 hovered below 6%.

Read the full article on HBR.org (subscription may be required).