Warren Buffett: Cost of capital

“Charlie and I don’t have the faintest idea what our cost of capital is at Berkshire, and we think the whole concept is a little crazy, frankly. But it’s something that’s taught in the business schools, and you have to be able to answer the questions or you don’t get out of business school. But we have a very simple arrangement in terms of what we do with money—we look for the most intelligent thing we can find to do…. And so, we measure alternatives against each other, and we measure alternatives against dividends, and we measure alternatives against repurchase of shares. But I have never seen a cost of capital calculation that made sense to me.”

–Warren Buffett. 

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