Definition of capital cost in English English dictionary
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. (synonym) cost of capital
A calculation of the overall cost of capital used by an enterprise, made by totalling the cost of each source of capital used multiplied by its proportional share of the total capital used. Abbreviation: WACC
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. (synonym) cost of capital
The cost of funds to a business enterprise It is calculated as the weighted average cost of debt and equity used by the firm More generally, it is the rate of return expected by the companys equity investors
The Cost of Capital is the expected return that you require on an investment to compensate you for its level of risk It is the appropriate rate to use when Discounting cash flows to find the Present Value of a Security
Variously defined as the weighted average of the cost of equity and debt capital employed by a REIT Unfortunately, an incorrect definition of this term is often commonly used, which equates the cost of equity capital to the REITs current dividend yield or FFO yield A companys "true" cost of capital is the investors expected rate of return on his/her investment
i 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 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
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
Used in computing an objective function, it is the interest rate The units are currency per time period (e g , dollars per year) One must be careful in computing this For example, the marginal cost of capital can be greater than the marginal interest rate because the latter applies to the entire borrowing, not just the last dollar borrowed (This is the "classical" definition, which does not consider advances in option theory )
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 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, stability of net income, the amount of new capital required, and other factors dealing with business and financial risks It is a composite of the cost for debt interest, preferred stock dividends, and common stockholders' earnings that provide the facilities used in supplying utility service
The weighted-averaged cost of: common equity, preferred equity and debt (after tax) of the individual company or sector The cost of debt is the average interest rate for all the companys or sectors debt instruments over the forecast period The cost of equity is the average total return demanded by an equity investor to invest in the company or sector The cost of equity is assumed to be the same for all companies and to be driven by personal income tax rates, inflation expectations and the long-run historical difference in real, after-tax returns between equities and bonds