As investors, as managers, or in our various capacities, we learn from experience to deal with everyday financial problems and to respond rationally to the ever changing economic environment. However, to optimize our decision making, we need more than 'rules of thumb.' We need to understand our choices, and the reasons market players behave the way they do. The cost of capital is a topic of particular interest in the current financial tumultuous times. In this book Dr. Porras provides a comprehensive overview of the subject, contextualizing the relationship between risk, return and the cost of capital by relating it to the needs of investors and borrowers, the historical evidence, and theories of choice and behavior. The content spans financial theory, its empirical tests and applications to real-world contemporary financial problems. The applied focus of this book provides answers to the questions most managers might have, in an entertaining style. It includes simple numerical examples and graphs to help understanding of the concepts.