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why is it virtually impossible to accurately calculate the cost of capital for a company.
i heard something about inflation being impossible to accurately forecast
PS: sorry, im asking to many silly questions
Are you watching the lectures, because I do deal with this in the free lectures on the cost of capital?
The main reason is the cost of equity. It is equal to the shareholders required rate of return and to calculate this we need to know the shareholders expectations of future dividends. There are ways we use to estimate the growth that shareholders expect, but it is impossible to know exactly.
Not being able to forecast inflation is not the problem. That is a problem is estimating the cash flows from projects and for calculating the real cost of capital (which is not the same as the actual cost of capital).
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