The Cost of Capital

2010 Satellite Account Underscores Importance of R D

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2010 Satellite Account Underscores Importance of R D

Over the years , corporate sector has nailed out quite a lot of methods to improve profitability and , at the same time , to save more cost . In simpler words , either improve ROR or shorten the payback period . Both these phenomenon has lead to the inclusion of cost of capital in the decision making of the businessmen . The inclusion of these costs have made it increasingly difficult

for the businesses to justify their decisions . It becomes increasingly more difficult if the business has gone corporate and thus is answerable to the public shareholders . Here an interesting finding has revealed how cost of capital can be improved and how would GDP of USA respond consequently

According to a research conducted by the Bureau of Economic Analysis , a simple change in the treatment of R D Cost as investment rather than expense could have produced growth 2 .7 higher 301 billion more than the current levels . This research was scheduled over the period of 10 years , i .e . 1998 to 2007 , in which the satellite accounts were studied and the impact of increase in R D investment was observed . By treating R D costs as investments , businesses were able to reap out the due benefits by keeping R D as its assets , and they could be offset against amortization or depreciation principle , depending upon the useful life or effectiveness of the...