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Cost of Capital - Dissertation Example

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Cost of Capital

Cost of capital is the minimum returns that a company can give shareholders on their investments and accordingly the company has to earn the minimum returns. If merging happens between one company that has high cash flows and another company that has low internally generated cash flows, then such merger can reduce the cost of capital. Introduction In today’s economic world, mergers and acquisitions (M & A) have become common strategy for growth and diversification of companies. During the 1990s, M & A activities broke all previous records both in terms of the number of such transactions and also the size of the mergers or acquisitions. In the early 2000s, there were major setbacks in the economies all over the world with global recession setting in. This resulted in drop of M & As worldwide although the volume still remains at a high level (Stahl & Voigt, 2003, p.2). The terms mergers and acquisitions involve a large number of transactions. Mergers can be of different forms like one firm can take over a different firm resulting in both the firms ceasing to exist individually to create a new firm. The principle purposes of merger of two companies are to strengthen their hold in the market and also to earn a competitive advantage in the industry. There are five common types of mergers. ...Show more

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Mergers and Cost of Capital: Delta Airlines as Case Study Abstract The terms mergers and acquisitions involve a large number of transactions. Mergers can be of different forms like one firm can take over a different firm resulting in both the firms ceasing to exist individually to create a new firm…
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