This is in general much less dilutive than the cost of capital of venture equity.

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Of course, if markets are illiquid, then investors may be reluctant to invest, and the cost of equity capital will rise.

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None is a true bottom-line margin that relates profits to sales after deducting all costs, including the opportunity cost of equity capital.

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And yet, a recent estimate in a 2009 paper on CSR reporting and the cost of equity capital, suggests that hundreds of large US firms, comprising as much as 10% of the value of the publicly traded US market, produce CSR reports.

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Modern economic theory and empirical evidence including a series of papers by one of us (Hassett) and Alan Auerbach of the University of California, Berkeley show that raising taxes on dividends at the individual level increases the cost of equity capital and lowers asset prices, harming consumers while hindering firms' ability to hire workers.

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The same Capsugel deal today, Kravis said, would have a cost of capital near 9%, a reflection of the late-summer weakness in equity markets and window closing in the high-yield market, which moves on a hair trigger in turbulent times.

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Many lenders reckon they will end up making a return on equity in the low teens, above their cost of capital.

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If a buyback raises the debt-to-equity ratio, it can lower the firm's overall cost of capital (because in most countries interest payments, unlike dividends, are tax deductible).

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For instance, if the company looks to raise capital in debt or equity markets in the future, the new structure would allow investors to derive different growth and cost of capital assumptions leading to a higher combined valuation.

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