Abstract

The implied capital cost is the cost of companies’ long-term funding. The companies supply themselves with the financial resources via the debts and equities and apply them to the assets. The cost f the implied capital is the most important and in fact the key tool in a great many of the managerial decision-making. The current research paper deals with the investigation of the relationship between equity cost and the implied corporate growth. The results indicated that it is via the identification of the capital cost rate that first of all it can be determined how much a given financial resource has been utilized for the minimization of the capital cost; secondly, what rate of the companies’ investment return can satisfy the equity holders’ expected rate and at the same time no change is caused to the value of the company. That is because if the earned return is found a lot smaller than the capital cost, the result would be a reduction in the company value and this way the management’s primary objective that is the very maximization of the equity wealth has not been met resultantly.