cost of capital


cost of capital
The rate of *return a corporation must pay for the *capital used to finance its activities. As capital in its widest sense is drawn from various forms of *debt and *equity (*common stock, *preferred stock, and *retained earnings), the cost of capital is usually a *weighted average of the costs of the individual sources of capital. A corporation’s cost of capital is normally expressed as a percentage, and it is often used as a *hurdle rate in *discounted cash flow analysis and other investment appraisal techniques: A proposed investment’s anticipated *return must exceed a corporation’s cost of capital if it is to be accepted. See also *internal rate of return.

Auditor's dictionary. 2014.

Look at other dictionaries:

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