Cost of Capital-The Effect to Firm Value and Profitability Performance in Malaysia

Firm's cost of capital is determined in the capital markets and is closely related to the degree of risk associated with new investments, existing assets, and the firm's capital structure. It is an overall return that a corporation must earn on its accessible assets and business operations in order to augment or preserve the value of its current stock. Thus a careful approximation of a firm's specific financing and weighted-average cost of capital (WACC) is essential for a good financial management. Thus study highlights the effect of cost of capital towards firms’ value and profitability for a sample of 415 listed companies in main market Bursa Malaysia for 6 years basis from 2005 to 2010. The result of the study shows significant relationships exist between cost of capital with firm value and profitability.