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What is the difference between capital cost and capital investment?
Wiki User
∙ 13y ago
A capital cost is an ammount of money that the owner of a business, spends that he/she will not get back. EG: Paying hydro bills, etc.
A capital investment is spending money on something that can, in turn, make you money someday. Eg: Purchasing a building or vehicle for your business.
Hope this helped!
Wiki User
∙ 13y ago
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What is the difference between a chosen investment and one that is passed up?
opportunity cost
Why is the marginal cost of capital more relevant to making investment decisions than the historic cost of capital?
because of deprecation
How would you describe the cost of capital?
The minimum rate of return the company must earn to be willing to make the investment. It is the rate of return the company could earn if, rather than making the capital investment, it invested the money in an alternative, but comparable, investment.
Relation between marginal efficiency of capital and marginal efficiency of investment?
MEC is the highest rate of return expected from an additional unit of capital stock over its cost. MEI is the expected rate of return from one additional unit of investmeni.
What is the opportunity cost to a fully employed economy of increasing capital investment?
A fall in consumption
What is the central issue when deciding to invest in cost savings or revenue enhancing capital investments?
The central issue is increasing the difference between revenue and cost; the result must be sufficient to justify the investment.
What is the difference between a chosen investment and one that is passed up?
opportunity cost
How do you explain cost of capital and its types?
Explain the term cost of capital and its importance in investment decision
Why is the cost of capital concept so important?
Cost of capital is cost of debt and cost of equity. The concept of cost of capital is important as it depicts the opportunity cost of making a specific investment.
What is the difference between returns and profit?
return is calculate against investment. profit is calculte against cost.
Why do you use the overall cost of capital for investment decisions even when only one source of capital will be used?
The overall cost of capital is the cost of the opportunity to make a certain investment. A financial manager uses the overall cost of capital as a way to gauge the rate of return of one investment over another.
Why is the marginal cost of capital more relevant to making investment decisions than the historic cost of capital?
because of deprecation
How can the CAPM be used to estimate the cost of capital for evaluating real investment decisions by a firm?
C.A.P.M describes the relationship between beta, market risk and expected return of the investment. In order to use the CAPM to estimate the cost of capital for this investment decision, we need to historical data, extract their levered beta, determine the appropriate manner to average them, and apply the resulting risk to the investment's CAPM.
Deferance between Cost of equity and cost of capital?
cost of equity denotes by "Ke" and cost of capital denotes by "Ko". Cost of Equity:- it is the expectation an investor has from his investment. it is actually the desire of investor. Cost of Debt:- it is the cost for the debt which we have raise for business . It is calculated at after tax cost as like interest is allowable in income tax.
What is the difference between a cost center a profit center and an investment center?
Cost centers - http://en.wikipedia.org/wiki/Cost_center Profit center - http://en.wikipedia.org/wiki/Profit_center Investment center - http://en.wikipedia.org/wiki/Investment_center
What is the effect on IRR if cost of capital decreased?
A change in the cost of capital will not, typically, impact on the IRR. IRR is measure of the annualised effective interest rate, or discount rate, required for the net present values of a stream of cash flows to equal zero. The IRR will not be affected by the cost of capital; instead you should compare the IRR to the cost of capital when making investment decisions. If the IRR is higher than the cost of capital the project/investment should be viable (i.e. should have a positive net present value - NPV). If the IRR is lower than the cost of capital it should not be undertaken. So, whilst a higher cost of capital will not change the IRR it will lead to fewer investment decisions being acceptable when using IRR as the method of assessing those investment decisions.
What is The average cost associated with each additional dollar of financing for investment projects is?
the marginal cost of capital "B"
