IN THE RECENT LITERATURE on corporation finance, the role of the cost of capital in financial structure decisions has come under debate. Charles W. Haley and Lawrence D. Schall [19] argue that the concept can be misleading when applied to decisions on capital structure. Other difficulties with the concept applied to capital structure problems have been pointed out by Stewart Myers [25] and clarified by D. J. Ashton and D. R. Atkins [3], while a defense of its use in this context is presented by Timothy Nantell and C. R. Carlson [26]. The more widespread use of the cost of capital as a hurdle rate for investment has also spurred recent debate by Fred Arditti [2], James Ang [1], as well as by Haley and Schall. Objections raised regarding the use of the cost of capital in this context are less severe than for capital structure decisions, and are at least partially matters of semantics. A defense of the cost of capital used in this context is contained in Nantell and Carlson as well as in a recent paper by William Beranek [5]. Haley and Schall summarize the difficulties with the weighted average cost of capital as being concerned with two points, (a) there may be a different cost of capital for different risk levels and for different time periods, (b) internal and external financial investments can have differing rates of return under certain conditions. Although technical problems such as those now cited remain with the concept of the cost of capital used as a hurdle rate, they appear to be of a refined and relatively minor nature when compared to the unresolved empirical questions associated with the cost of capital. The cost of equity alone accounts for much of the difficulty. It has been variously represented in the literature as a dividend yield, an earnings yield, an ex-post return on stock, and as the return on the general class of real assets. In addition, at least four substantively different groups of ideas have emerged over the past several decades as to how we may best represent fluctuations in the overall cost of capital through time. This produces a dilemma for those interested in empirical research into capital and investment theory. For, even if we agree upon the theoretical role of the cost of capital, which measure should be used to represent this role and why? Virtually no empirical results exist at present to support either the choice of one cost of capital measure over another or to support the decision that we may remain indifferent among the alternatives that have been presented.