PPRuNe Forums - View Single Post - MAG buy STN
Thread: MAG buy STN
View Single Post
Old 22nd Jan 2013, 20:21
  #73 (permalink)  
LGS6753
 
Join Date: Jul 2003
Location: Under the flight path
Posts: 2,633
Received 14 Likes on 5 Posts
Because the money has come from somewhere.

If it's been borrowed from a bank, the bank will require interest.
If it's shareholder's funds (retained profits) the shareholders will require to earn a dividend on it. (If they aren't going to get a dividend on it, the company should return it to shareholders).
Any money or asset that a company applies to a specific project will be judged by its opportunity cost, i.e. what could otherwise have been done with it.

It's easiest to use the example of bank borrowings because that's an understandable concept, but all money carries a cost.
LGS6753 is offline