The cost of capital for companies reflects the attitudes of investors toward risk—specifically, the reward they expect for taking risks. If they become more averse to risk, companies have difficulty raising capital and may need to cancel or defer some investments or to forgo some mergers and acquisitions. So it's understandable that the current financial crisis has many executives concerned about what the price of risk—the cost of capital—will mean for their strategic decisions in the near term...
By: Richard Dobbs, Bin Jiang and Timothy Koller