cost of capital
Financial Terms Canada - cost of capital
the opportunity cost of the funds employed as the result of an investment decision; the rate of return that a business could earn if it chose another investment with equivalent risk ...
Cost Of Capital
An economic concept that may be defined in various ways. 1) A discounted rate equating the market value of securities with the current value of cash flows to the security owners. 2) A discount rate equating market value of securities to the current value of the net operating ...
Cost of capital
The cost of capital is the rate of return that providers of capital demand to compensate them for both the time value of their money, and risk.
Cost of Capital Model
A way of estimating the required rate of return on a business investment such as small business ownership.
cost of capital (COC)
the weighted average cost of the
various sources of funds (debt and stock) that comprise a
firm's financial structure ...
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In the context of financial management, the term "~" refers to the remuneration required by investors or lenders to induce them to provide funding for an ongoing business.
The ~ is the cost a firm incurs from financing through debt and Equity . From a shareholder's standpoint the ~ is the required rate of return in the market for an Investment of equal risk.
~ is what it costs you to put your money to work. In order to grow rich and famous as well as retire young, it's important that your expected return is greater than your ~. You will run into trouble if it's not.
Average ~ definition :
A firm's required payout to bondholders and stockholders expressed as a percentage of capital contributed to the firm.
The required return for a capital budgeting project.
Cost of funds
Interest rate associated with borrowing money.
AVERAGE ~ - A firm's required payout to bondholders and stockholders expressed as a perce...
AVERAGE DAILY BALANCE - The interest you owe on your credit card or earn on a saving account may be cal...
AVERAGE DAILY FLOAT - average ledger balance minus average collected balance ...
Financial & Investment Dictionary:
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What is the ~?
Why do companies use cost flow assumptions to cost their inventories?
What is the working capital turnover ratio?
What are the ways to value inventory?
What is inventory valuation?
What is a limitation of the inventory turnover ratio?
Weighted Average ~ (WACC) Question with Expected Return Model
Weighted Average ~ (WACC) Question with Dividend Growth Model ...
Discounted cash flow
Economic Value Added
Internal rate of return
Minimum acceptable rate of return
Net present value
Opportunity cost ...
Measures the opportunity cost incurred by a company for holding the level of required capital. The cost arises because the capital can only earn broad market-related returns while tied up in the business, missing out on more profitable opportunities elsewhere.
~. For any given level of corporate risk, the ~ faced by f1rn1s in a given country --a key element of their competitiveness --is essentially determined by four factors: (1) interest rates, or the cost of borrowing, prevailing in the country; (2) tax policies, ...
~ The weighted average cost for long-term funds raised by a company from different sources such as term loans, DEBENTURES/BONDS, PREFERENCE SHARES, EQUITY SHARES and retained earnings.
~: The rate a company must pay investors to induce them to invest in the company's equity or debt.
Cost of Risk: The cost associated with the risk of a particular event happening.
Counter-Party: The other participant to a project agreement or a swap contract.
The amount a firm must pay the owners of CAPITAL for the privilege of using it. This includes INTEREST payments on corporate DEBT, as well as the dividends generated for shareholders.
~ The rate that must be earned by the company to satisfy all the firm's providers of capital. It is based on the opportunity cost of funds.
Coupon Interest payment on debt.
The cost of alternative sources of financing to a business.
Currency Risk Sharing ...
~ - 1. rate of return that is necessary to maintain the market value (or stock price) of a firm also called hurdle rate. Or 2. is the rate of return that a business could earn if it so chose other investments with the equivalent risks.
Average ~ Payout required to be made by a firm to stockholders and bondholders, expressed in terms of a percentage of the contribution of capital. Formula: total required ~ divided by total amount of capital contributed. … [Read more...] ...
A firm's required payout to bondholders and stockholders expressed as a percentage of capital contributed to the firm. Average ~ is computed by dividing the total required ~ by the total amount of contributed capital.
The rate of return required by providers of capital. Providers of capital include banks and investors.
How to Ace Your First Test Managing Real Money in the Real World: As a teen, you're beginning to make some grown-up decisions about how to save and spend your money. That's why learning the right ways to manage money…right from the start…is important. Here are suggestions. More...
The ~ is the minimum acceptable rate of return (usually on an after-tax basis) required by the management of the firm to be earned by a capital expenditure. In making this determination, the level of risk is considered.
The required return necessary to make a capital budgeting project, such as building a new factory, worthwhile. ~ includes the cost of debt and the cost of equity.
The ~ to conduct medical R&D is high because investors must be compensated with high returns to offset the risky and long drug development process. This ~ could be reduced, and thus medical innovation spurred, by...
Why Retirees Should Never Invest In Annuities ...
The ~ goods: an increase in the cost of production reduces
profits. Lower profit potential will reduce investment spending.
Annual ~ Recovery
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Opportunity cost of capital
Expected return that is foregone by investing in a project rather than in comparable financial securities.
Opportunity costs ...
Opportunity cost of capital:
The expected return which is foregone when funds are invested in a project rather than in financial securities with a comparable level of risk.
Français: Coût d'opportunité du capital
Español: Costo de oportunidad del capital, costo de opción del capital ...
In the context of investing, refers to the average cost of shares or stock bought at different prices over time.
Average ~ ...
What Is Marginal Cost of Capital?
What Is Short Run Marginal Cost?
What Is the Significance of Differential Cost?
Weighted average ~ (WACC)
Expected return on a portfolio of all a firm's securities. Used as a hurdle rate for capital investment.
Weighted Average ~ (WACC)
Definition: Expected return on a portfolio of all a firm's securities. Used as a hurdle rate for capital investment.
Weighted Average ~ (WACC). The Required Rate of Return that must be paid or received by all of the investors with respect to a company's securities. Used as a hurdle rate for capital.
Capital rationing Placing one or more limits on the amount of new investment undertaken by a firm, either by using a higher ~, or by setting a maximum on parts of, and/or the entirety of, the capital budget.
Incremental ~ Average cost applicable to the issue of each additional unit of debt and equity.
WACC See: Weighted average ~ WEBSSee: World Equity Benchmark Series WFThe two-character ISO 3166 country code for WALLIS AND FUTUNA. WISee: When issued WLFThe three-character ISO 3166 country code for WALLIS AND FUTUNA.
WACC See: Weighted average ~. Waiting period Time during which the SEC studies a firm's registration statement. During this time the firm may distribute a preliminary prospectus. Wall Street Generic term for firms that buy, sell, and underwrite securities.
The main difficulties of this method is the determination of the explicit forecast of cash flows, estimating the ~, the calculation of terminal value (TV) and the proper discount rate.
Weighted average ~
Weighted average ~ (WACC)
Weighted Average ~ - WACC
Weighted average Coupon
Weighted average life
Weighted Average Market Capitalization
Weighted average maturity
Weighted average portfolio yield
Weighted average remaining maturity ...
The corporate income tax raises the ~ and reduces after-tax returns in the corporate sector, and thus leads to a migration of capital into noncorporate or taxexempt sectors of the economy.
See weighted average ~....(Read more)
The period after a company prospectus has been filed but prior to the IPO date, and during which contacts with investors are limited. In ins...(Read more)
Waiver Of Premium ...
cash flow to a firm in excess of that required to fund all projects that have positive net present values when discounted at the relevant cost of capital.
The appropriate discount rate for investment appraisal of an investment is the ~ to the investor, with an appropriate adjustment for the riskinness of the investment.
Annual Rate of Return Method
Cash Payback Method
Present Value Concepts
Present Value Table
Lump Sum vs. Annuity
Present Value of Annuity
Assignment for Appendix C
Net Present Value (NPV) Method
Internal Rate of Return (IRR) Method
IRR--Unequal Cash Flows ...
In corporate finance and investment practice it is common to project a set of cash flows, then discount them using an appropriate ~ or discount rate. If the resulting value is less than the cost of the investment, it is rejected.
~ for a Business
How to Calculate the Cost of Debt Capital
The New Investor's Guide to Capital Structure
What is the debt to equity ratio, how is it calculated and what does it measure?
What Is the Weighted Average ~?
The business model indicates how the firm will convert inputs (capital, raw materials and labour) into outputs (total value of goods produced) and make a return that is greater than the opportunity cost of capital and delivers a return to its investors.
The downgrade usually has the effect of reducing the security's price and raising the issuer's ~. A downgrade in the rating of a stock by a security analyst (e.g., buy, hold, sell) has more varied effects.
IRR is also easier to calculate because it doesn't require estimation of ~ or hurdle rate. It just requires the initial investment and cash flows. However, this same convenience can become a disadvantage if projects are accepted without comparison to ~.
Is equal to the present value of a future returns, discounted at a marginal cost of capital, minus the present value of the cost of the investment.
Net Profit (net earnings):
The profit remaining after all expenses and taxes have been paid by a company.
reduced, to allow for the delay in receiving that income, using an interest rate (discount rate) based on the ~. If the total of these discounted annual returns is greater than the capital sum needed to buy the asset now, the investment may be considered profitable.
Adjusted Cost Basis
Tax purpose cost measuring method that allows cost to be increased by the ~ improvements or reduced due to depreciation. The cost of a home would be increased by the amount paid to install a permanent improvement such as air conditioning.
Companies that have generated returns on capital higher than their ~ for many years running usually have a moat, especially if their returns on capital have been rising or are fairly stable.
Either way, the discount rate measures the opportunity cost of capital -- how much interest you could earn if you put your money in an interest-bearing safe investment.
Bond Values ...
economic profit Profit in excess of the opportunity cost of capital.
economic value A generalization of market value.
economic value added Economic profit.
Residual income: A divisional or company-wide performance measure that subtracts a charge for the ~ from after-tax operating income. Residual income represents an attempt to use accounting information to approximate economic profits.
The NPV method uses a discounted rate of interest based on the marginal cost of capital to future cash flows to bring them into to the present. The IRR formula finds an investment's average return for the life of the investment.
The formula is EVA = NOPAT - ( C x Kc ) where C is the amount of capital a company plans to invest in a project, and Kc is the ~, i.e. the return rate expected by investors.
The discount rate that gives a set of future cash flows a present value of zero. If the IRR is greater than the opportunity cost of capital, then the relevant project is potentially attractive.
Filling vacancies from the ranks of existing employees.
And it is possible that if interest rates do not reflect the true social opportunity cost of capital in different countries, or if international credit markets divert lending from productive to speculative uses, ...
Refunding Bond : the issuance of a new bond for the purpose of redeeming an outstanding bond issue. This generally happens when interest rates drop and an issuer wants to take advantage of the lower ~.
The lower-cost funds are used by the EDC to buy fixed assets that are then leased to the business. The lease rate reflects the EDC's low ~.
AVENUE BAPTIST BROTHERHOOD Average Average (across-day) measures Average accounting return Average age of accounts receivable Average collection period, or days' receivables Average cost Average ~ Average daily balance Average discount rate Average down Average equity Average life ...
See also: What is the meaning of Index, Transaction, Expense, Payroll, Banks?