cost of capital

The return, expressed in terms of an interest rate, that an organization is required to pay for the capital used in financing its activities. This will vary according to the type or types of capital employed (e.g., equity share capital, loan capital, or some mixture of the two). One approach to establishing the cost of capital is therefore to compute a unique weighted average cost of capital for each organization, based on its particular mix of capital sources. The cost of capital is often used as a hurdle rate in discounted cash flow calculations.

Accounting dictionary. 2014.

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  • Cost of capital — The cost of capital is a term used in the field of financial investment to refer to the cost of a company s funds (both debt and equity), or, from an investor s point of view the shareholder s required return on a portfolio of all the company s… …   Wikipedia

  • cost of capital — The return, expressed in terms of an interest rate, that an organization is required to pay for the capital used in financing its activities. This will vary according to the type or types of capital employed (e. g. , equity capital, loan capital …   Big dictionary of business and management

  • 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… …   Auditor's dictionary

  • Cost Of Capital — The required return necessary to make a capital budgeting project, such as building a new factory, worthwhile. Cost of capital includes the cost of debt and the cost of equity. The cost of capital determines how a company can raise money (through …   Investment dictionary

  • Cost of capital — The required return for a capital budgeting project. The New York Times Financial Glossary * * * cost of capital UK US noun [S] ► ECONOMICS, FINANCE the amount of money that a company must pay out in dividends to it shareholders, and in interest… …   Financial and business terms

  • cost of capital — The required return for a capital budgeting project. Bloomberg Financial Dictionary * * * cost of capital UK US noun [S] ► ECONOMICS, FINANCE the amount of money that a company must pay out in dividends to it shareholders, and in interest on… …   Financial and business terms

  • Cost of capital —   The rate of return a utility must offer to obtain additional funds. The cost of capital varies with the leverage ratio, the effective income tax rate, conditions in the bond and stock markets, growth rate of the utility, its dividend strategy,… …   Energy terms

  • cost of capital — Fin the minimum acceptable return on an investment, generally computed as a hurdle rate for use in investment appraisal exercises. The computation of the optimal cost of capital can be complex, and many ways of determining this opportunity cost… …   The ultimate business dictionary

  • cost of capital — kapitalo kaina statusas T sritis Gynyba apibrėžtis Suma, kurios atsisako organizacija nepasirinkdama alternatyvaus investavimo su lygiaverte rizika. atitikmenys: angl. cost of capital ryšiai: susijęs terminas – alternatyviosios sąnaudos šaltinis… …   Lithuanian dictionary (lietuvių žodynas)

  • cost of capital — kapitalo kaina statusas T sritis turto vertinimas apibrėžtis Numatoma grąžos norma rinkoje, reikalinga lėšoms tam tikrai investicijai pritraukti. atitikmenys: angl. cost of capital ryšiai: susijęs terminas – grąžos norma šaltinis Tarptautiniai… …   Lithuanian dictionary (lietuvių žodynas)

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