Definitions for "cost of capital"
Related Terms:
Opportunity cost of capital, Weighted average cost of capital, Return, Rate of return, Return on investment, Hurdle rate, Leverage, Roi, Total return, Investment return, Return-on-investment, Total rate of return, Opportunity cost, Return on invested capital, Leveraging, Financial leverage, Gearing, Return on capital, Yield, Effective yield, Required rate of return, Equity method, Turnover rate, Average annual total return, Performance, Investment risk, Equity, Returns, Carried interest, Equity investments, Return of capital, Investment, Opportunity costs, Marginal cost of capital, Portfolio turnover, Accumulation, Current income, Economic value added, Reinvest, Benchmark portfolio, Capital, Investing, Reinvestment rate, Accounting rate of return, Investor, Formula investing, Absolute return, Debt-to-equity ratio, Debt to equity ratio, Internal rate of return
The opportunity cost of an investment; that is, the rate of return that a company...
The rate that must be earned by the company to satisfy all the firm's providers of capital. It is based on the opportunity cost of funds. Finance By Example (Archives): Cost of Borrowing & Rating Agencies
The rate of return an enterprise has to offer to induce investors to provide it with capital. The cost of loan capital is the rate of interest that has to be paid. The cost of equity capital is the expected yield needed to induce investors to buy shares.
Strategically defined minimum return required by capital providers
The average cost of financing business capital eg loan interest and share dividends. If the average return on investment is less than the cost of financing, the business will be facing problems.
The cost of alternative sources of financing for a company. Both liabilities and Stockholders' Equity have costs.
or WACC - Interest rate paid for the use of capital funds; includes both debt and equity funds. For debt and equity considered, it is weighted average cost of capital (10.2–3).
The minimum rate of return a firm needs to earn on investments to succeed. It is the rate of return required to keep the firm's investors satisfied.
see Weighted average cost of capital.
The effective after-tax cost of raising new funds. Because the cost of capital varies with the source of funds employed, the overall cost of capital for a firm that raises funds from various sources is a weighted average of the various costs.
Management's estimate of its weighted average cost of equity and debt capital.
The minimum rate of return that a company must earn on its assets to satisfy investors. Also may refer to the cost of raising money. The return, expressed in terms of an interest rate, that an organization is required to pay for the capital used in financing its activities. As the capital of an organization can be a mix of equity share capital, loan capital, and debt, there is considerable debate as to whether or not the cost of capital increases as the gearing increases. Another approach to establishing the cost of capital it to compute a unique weighted average cost of capital for each organization, based on its particular mix of capital sources. The cost of capital it often used as a hurdle rate in discounted cash flow calculations.
In terms of opportunity cost, is the benefit given up through having investment capital tied up in an activity or group of activities for a period of time. Is often specified as the interest rate paid for borrowed funds, or the actual amount of interest paid.
The minimum rate of return a firm must earn on its investments in order to satisfy the expectations of investors who provide funds to it. It is often measured as the weighted arithmetic average of the cost of various sources of finance tapped by the firm.
The marginal cost of an additional dollar of capital; the weighted average of the costs of the capital expected to be raised by the firm to support future investment opportunities.
The opportunity cost of an investment, i.e. the rate of return that a company would otherwise be able to earn at the same risk level as the investment that has been selected.
The expected rate of return required by the market to attract funds for a specific investment.
In relation to equity, the return which could be obtained by investing elsewhere, in relation to debt, the interest rate and associated charges.
The required return for a capital budgeting project.
The weighted-average cost of funds that a firm uses, both debt and equity, in order to fund its assets.
the opportunity cost of the funds employed as the result of an investment decision; the rate of return that a business could earn if it chose another investment with equivalent risk
A company issues stock (or debt) in exchange for capital to fund its operations. The investor provides this capital by purchasing shares (or bonds) in exchange for an expected return. Because the company foregoes the return on the stock or debt it issues, its cost of capital is identical to the investor's expected return.
What investors expect to earn when factoring in the volatility of a business. Also known as the discount rate.
the weighted average of the costs of debt and equity capital. It is often used for discounting the company's cash flow stream. Estimating the cost of capital is often used for establishing the minimum acceptable rate of return or hurdle rate that management requires on new investment proposals.
The overall cost to an organization of obtaining investment funds, including the cost of both debt sources and equity sources.
blended cost of equity and borrowed funds used to invest in operating capital required for business.
Return on new, average-risk investment that a company must expect to maintain share price.
The cost to borrow or invest capital.
The average cost to a company of servicing its capital: its equity (through dividend payments) and its loans (through interest payments).
Cost of Capital is the rate of return an individual or business could earn if it chose a different investment than the one it currently owns. It is the cost lost by choosing to go with one investment over another. Opportunity cost is another term that is used to measure this lost opportunity.
The cost to a company, such as a REIT, of raising capital in the form of equity (common or preferred stock) or debt. The cost of equity capital generally is considered to include both the dividend rate as well as the expected equity growth either by higher dividends or growth in stock prices. The cost of debt capital is merely the interest expense on the debt incurred.
The total expected rate of return that an investment must generate in order to provide investors with the prevailing market yield consistent with risk after accounting for corporate taxes (if applicable) and depreciation.
the expected rate of return (discount rate) that the market requires in order to attract funds to a particular investment.
The rate of return that is necessary to maintain market value of a real estate project and is also used for project evaluation purposes.
Weighted average cost of capital sources such as mortgage debt, stocks and retained earnings.
The rate that a company must pay for its capital or the minimum return that is required to maintain the market value of a company's common stock. Cost of capital reflects the market's perception of the risk associated with a company's common stock.
The cost of capital for a firm is a weighted sum of the cost of equity and the cost of debt (see the financing decision). Firms finance their operations by three mechanisms: issuing stock (equity), issuing debt (borrowing from a bank is equivalent for this purpose) (those two are external financing), and reinvesting prior earnings (internal financing).