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Definitions from WordNet

Definitions from the Web

Cost of Capital

Description:

The cost of capital refers to the required rate of return or the expense a company must incur to finance its operations or investment projects through a combination of debt and equity. It represents the cost of obtaining funds from various sources and is a crucial consideration in financial decision-making.

Senses:

1. Financial Sense: The cost of capital is the rate of return expected by investors or demanded by lenders in exchange for providing capital to a company.
2. Business Sense: The cost of capital also reflects the weighted average cost of both debt and equity used by a company to fund various projects and activities.

Sample Sentences:

• The cost of capital for this project is quite high due to the risky nature of the industry.
• When determining whether to invest in a new venture, businesses carefully weigh the potential returns against the cost of capital.
• By reducing its reliance on expensive debt financing and attracting more equity investors, the company managed to lower its overall cost of capital.
• High-risk investments typically demand higher cost of capital to compensate investors for the increased uncertainty.

Related Products:

Explore related books and resources on the topic of cost of capital:

• Cost of Capital in Finance
• Weighted Average Cost of Capital: Concepts and Applications
• Capital Budgeting: Principles and Techniques