Calculating I From Financial Data: A Longitudinal Analysis Of Construction Related Firms

The interest rate, i, for evaluating investments can be derived from the opportunity cost of capital or the cost of financing. This paper applies a variety of methods to calculate the latter using the published financial data of five publicly listed steel fabrication firms. This industry was chosen because it is part of engineering and construction, the firms have enough organizational continuity, and using a single industry controls for some sources of variability. This analysis is done over time to provide a longitudinal perspective on the stability and meaningfulness of the different proposed measures. This research is intended to establish a data-based foundation for teaching students in engineering economy courses how to establish the minimum attractive rate of return. This paper will present results for this data set and discuss links with other ongoing research.