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What is Cost of Capital?
Considering the fact, when someone invests money (investor), he always has the desire of rate of return. The minimum rate of returnsis termed as thecost of capital. It might be sound complicated to students that this capital investment can be done for reversed capital or system of debt or any shares of equity.
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Basic aspects on the concept of cost of capital:
As we all know, if someone wants to start any project, he or she needs initial capital investment. In this context, business organizations also run on the same rules.
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Components of Cost of Capital:
As the minimum rate of return is essential to maintain the market shares, cost of capital has some components that include:
Moreover, students should know that cost of capital is one of the significant concepts in budgeting. It supports great in making a decision.
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