Unlevered Cost Of Capital


DEFINITION of 'Unlevered Cost Of Capital'

An evaluation that uses either a hypothetical or actual debt-free scenario when measuring the cost to a firm to implement a particular capital project. The unlevered cost of capital should illustrate that it is a cheaper alternative than a levered cost of capital investment program. A variation of the cost of capital calculation.

BREAKING DOWN 'Unlevered Cost Of Capital'

Unlevered cost of capital will be a cheaper alternative to a levered cost of capital investment, as there are higher costs associated with the issuing of debt or preferred equity. Some of these marginal costs include, but are not limited, underwriting costs, brokerage fees, and dividend and coupon payments.

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

    In this case, the "cost" being referred to is the measurable cost of obtaining capital. With debt, this is the interest expense ... Read Full Answer >>
  2. Do working capital funds expire?

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  3. Do you discount working capital in net present value (NPV)?

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  4. How is working capital different from fixed capital?

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  5. How much working capital does a small business need?

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