Munger: "Obviously, consideration of costs is key, including opportunity costs. Of course capital isn't free. It's easy to figure out your cost of borrowing, but theorists went bonkers on the cost of equity capital. They say that if you're generating a 100% return on capital, then you shouldn't invest in something that generates an 80% return on capital. It's crazy." (2001 Annual Meeting)
Buffett: "A corporation's cost of capital is 1/4 of 1% below the return on capital of any deal the CEO wants to do." (2001 Annual Meeting)
"I've listened to many cost of capital discussions and they've never made much sense. It's taught in business school and consultants use it, so Board members nod their heads without any idea of what's going on." (2001 Annual Meeting)
No comments:
Post a Comment