Cost Of Capital

What does it Mean? The required return necessary to make a capital budgeting project, such as building a new factory, worthwhile. Cost of capital includes the cost of debt and the cost of equity.
 
Investopedia Says... The cost of capital determines how a company can raise money (through a stock issue, borrowing, or a mix of the two). This is the rate of return that a firm would receive if it invested in a different vehicle with similar risk.

Terms Related Links

Capital Budgeting
Cost Of Debt
Cost Of Equity
Opportunity Cost
Payback Period
Return On New Invested Capital - RONIC
Risk
Unlevered Cost Of Capital
Weighted Average Cost Of Capital - WACC
Weighted Average Cost of Equity - WACE

Terms Related Links
The Capital Asset Pricing Model: An Overview - CAPM helps you determine what return you deserve for putting your money at risk.

Investors Need A Good WACC - Weighted average cost of capital is hard to calculate, but a solid way to measure investment quality.

An Inside Look At Internal Rate Of Return - Use this method to choose which project or investment is right for you.

All About EVA - Looking for a formula to determine whether a company is creating wealth? Time to learn all about Economic Value Added.

What do people mean when they say debt is a relatively cheaper form of finance than equity?

What is the difference between economic value added and market value added?

Cost Of Capital - A short article explaining different costs of capital and their measurement.

Analytical Process for WACC and Capital Structure - An academic paper by Ruben Cohen on the WACC curve locating the optimal capital structure.

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