Corporate Finance Explained | Cost of Capital

Episode notes

In this episode of Corporate Finance Explained on FinPod, we dive into the invisible number that decides whether growth creates value or destroys it: cost of capital. Headlines love expansion, acquisitions, and moonshot investments, but the real line between “big growth story” and “value trap” is the price of money itself. We unpack WACC (weighted average cost of capital), why it acts like a company’s strategic “gravity,” and how it becomes the hurdle rate every project must clear. If returns don’t beat that hurdle, the business can show accounting profit while quietly eroding shareholder value through negative EVA (economic value added). You’ll hear how cost of capital is shaped by debt vs equity, the tax shield on interest, and why cost of equity is a real opportunity cost even if there’s no monthly “invoice” for shareholders.

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