Section 1
The Basics of the Cost of Capital
Book
Version 3
By Boundless
By Boundless
Boundless Finance
Finance
by Boundless
3 concepts
Defining the Cost of Capital
Risk, return, and the time value of money are central inputs in distilling the cost of capital as an investor or borrower.
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Differences Between Required Return and the Cost of Capital
The average cost of capital is calculated via combining the overall average required rate on debt stakeholders and equity stakeholders
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Relationship Between Financial Policy and the Cost of Capital
Financial policy, not cost of capital, must be utilized to determine which investments to pursue, given that resources are limited.