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I'm not sure I follow. The cost of capital is lower in the US than in developing countries because of the generally lower risk of investing in the US. For examp
by tfehring 5y ago
I'm not sure I follow. The cost of capital is lower in the US than in developing countries because of the generally lower risk of investing in the US. For example, long-term AAA corporate bond yields seem to be about 150 bps higher in China than the US; estimating the cost of equity rigorously is much harder but most estimates would suggest an even wider gap.
- fastaguy88 5y agoPerhaps it’s less the cost of capital, and more the relative return. If I can only get a 10% return from a manufacturing investment, but I can get 20% in finance or technology, why would I settle for 10%. The thing that puzzles me is, if all that money is flowing into the 20% industry, why don’t the returns go down?
- kevin_thibedeau 5y agoWhy would a grocery store bother with selling food when they only get 3% margin?
- wrycoder 5y agoVolume.
- ipaddr 5y agoVolume/real estate
- throwaway210222 5y agoBecause large grocery store chains are not in retail - they are in finance. They make a fortune with the cash they get at the tills (net-0) before they pay it to their suppliers (net-60, net-90).
- jon_richards 5y agoYou need to annualize that 3% to make it comparable. A grocery store isn’t buying everything at the start of the year and selling it at the end. If they do 12 inventory turnovers in a year, that 3% margin becomes a 36% return for the same amount of capital.