Cost of Capital


Definition: Cost of Capital is the amount, expressed as an annual percentage, that a firm must pay to obtain adequate funds (money) to finance its business and/or its operations.
The Cost of Capital is the weighted sum of the:
- Cost of Equity (regular shares)
- Cost of Preferred Stock (special shares)
- Cost of Debt (borrowings)
There are many different sources (types) of capital: traditional debt or equity financing or owner financing, grants, gains on investment capital, retained earnings, accrual financing contracts and forward payment agreements on capital.
See also WACC.


More on investing: Alternative Investments, Asset Management, Break-even Point, BRIC Countries, Capital Structure, more...


MBA Brief offers accurate and concise definitions of MBA concepts, frameworks, methods and models.

We love to keep things really short, but provide links to learn more about your subject and to similar concepts.

© 2023 MBA Brief - Last updated: 29-1-2023  -  Privacy   |   Terms