DEFINITION of 'Incremental Cost Of Capital'
A term used in capital budgeting, the incremental cost of capital refers to the average cost a company incurs to issue one additional unit of debt or equity. The incremental cost of capital varies according to how many more or fewer units of debt or equity a company wishes to issue. The calculation frequently used to determine the cost of capital is the weighted average cost of capital formula (WACC), which weights the cost of debt and equity, according to the company's capital structure.
BREAKING DOWN 'Incremental Cost Of Capital'
The term "incremental cost of capital" refers to costs associated with acquiring more debt or equity for a future project. The incremental cost of capital is usually equal to the hurdle rate, which is the required rate of return for the acceptance or rejecting of a project.

Incremental Cost
The encompassing change that a company experiences within its ... 
Long Run Incremental Cost  LRIC
Forwardlooking incremental costs that can be accounted for by ... 
Composite Cost Of Capital
A company's cost to borrow money given the proportional amounts ... 
Incremental Cash Flow
The additional operating cash flow that an organization receives ... 
Capitalization Structure
The proportion of debt and equity in the capital configuration ... 
Capital Markets
Capital markets are markets for buying and selling equity and ...

Economics
Explaining Cost Of Capital
Cost of capital is the cost of funds used to finance a business. 
Term
What is Incremental Cost?
Incremental cost is the added cost of manufacturing one more unit. 
Economics
Understanding Incremental Cash Flow
Incremental cash flow is the additional operating cash flow an organization expects to generate from a new project. 
Investing Basics
Breaking Down Optimal Capital Structure
An optimal capital structure shows the best balance of debt to equity a company can have in order to minimize its cost of capital. 
Personal Finance
Target Corp: WACC Analysis (TGT)
Learn about the importance of capital structure when making investment decisions, and how Target's capital structure compares against the rest of the industry. 
Investing
Capital Structure
Capital structure is the combination of the debt and equity a company uses to finance its longterm operations and growth. 
Investing
IBM Stock: Capital Structure Analysis
Learn about IBM's capital structure and why its market debttoequity ratio is lower than the rest of the industry, even though its market capitalization declined. 
Investing
Weighted Average Cost Of Capital (WACC)
Weighted average cost of capital may be hard to calculate, but it's a solid way to measure investment quality 
Bonds & Fixed Income
Evaluating A Company's Capital Structure
Learn to use the composition of debt and equity to evaluate balance sheet strength. 
Credit & Loans
Debt Ratios: Capitalization Ratio
By Richard Loth (Contact  Biography)The capitalization ratio measures the debt component of a company's capital structure, or capitalization (i.e., the sum of longterm debt liabilities and ...

Which is more important when estimating cost of capital  debt or equity?
Learn about the relative costs of debt and equity and how they affect the overall cost of capital, including why debt may ... Read Answer >> 
How do you calculate the ratio between debt and equity in the cost of capital
Discover how to calculate the ratio between debt and equity when making cost of capital estimations using the weighted average ... Read Answer >> 
What is the difference between cost of equity and cost of capital?
Read about some of the differences between a company's cost of equity and its cost of capital, two measures of its required ... Read Answer >> 
How do you calculate the proper weights of different costs of capital?
Understand how to calculate the weights of the difference costs of capital and how this calculation is used to determine ... Read Answer >> 
How does a company choose between debt and equity in its capital structure?
Learn about the benefits and drawbacks of debt and equity financing and how companies compare different capital structures ... Read Answer >> 
What is the formula for calculating weighted average cost of capital (WACC) in Excel?
Learn about the weighted average cost of capital (WACC) formula and how it is used to estimate the average cost of raising ... Read Answer >>