les Nouvelles - June 2013

Costs Of Capital-You Can Love More Than Just One

David Wanetick

IncreMental Advantage

In the world of licensing, the cost of capital is supposed to reflect the risk—as well as opportunity cost and erosion of value due to inflation—of receiving anticipated royalty revenues over time. If a licensing agreement encapsulates the collection of revenue from multiple sources—each of which represents a varying degree of risk—why should our models only include one number for the cost of capital?

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