The sum of its parts


It is well known that the weighted average cost of capital for corporate subdivisions or individual projects is likely to be different from the cost of capital for the consolidated corporation. If we view the corporation as a portfolio of assets that are, in effect, real options that can be exercised if the return on an asset is greater than the corporation’s market return, the composition of this asset portfolio is clearly a major driver of the firm’s profitability. Not every project should

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