In valuation and financial decision making, the cost of
capital estimate is just as important as the estimate of
the expected amounts of income to be discounted or
capitalized. Yet we often see income estimates
laboriously developed and then converted to estimated
value by a cost of capital that is practically pulled
out of thin air. Valuators should always test cost of
capital estimates for reasonableness and not simply
apply data or formulas by rote. pdf
