cost of capital


Definitions (2)

1.Opportunity cost of funds employed in a business; the rate of return investors could earn if an alternative investment avenue (usually time deposit) was chosen.
2.Cost of debt and equity capital acquired from different sources. See also composite cost of capital.

Use cost of capital in a sentence

  • The cost of capital must be taken into account when planning business expansion; without careful planning, a business could miss out on more lucrative investments opportunities.

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  • If you want to figure out if a new project is worth taking on the first thing you must do is find its cost of capital.

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  • If you want to figure out how much profit you may earn that year you need to know what your cost of capital was.

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