composite cost of capital definition

composite cost of capital

Weighted average of the component costs of common stock (ordinary shares), preferred stock (preference shares), and debt. Each component of capital is given a relative importance (weight) on the basis of its associated interest rate, management's loss of control, risk exposure, etc., to compute weighted average cost of capital. It shows the cost of each additional dollar of capital, as opposed to the average cost of the total capital raised.

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