... that the cost of capital of the firm depends on four factors: the risk free rate, the aggregate risk tolerance of the market, the expected cash flow of the firm, and the covariance of the firm’s ... in the parameter H, i.e., ratio of the expected cash flows to the covariance with all other firms, the cost of capital will change. The re-investment policy will depend on the nature of the ... proportionately. Therefore, there was no affect on the beta coefficient of returns, which is the ratio of the covariance of the firm’s return to the market divided by the variance of the market return,...