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Explain the term cost of capital and its importance in investment decision

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14y ago

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How does capital asset pricing model help explain changing costs of capital?

It helps to explain the costs of capital by creating a model which intuitively understands the cost of capital as a function of a small number of well-understood economic variables, such as interest rate, demand, future discount, and capital stock.


What do you understand by cost of capital?

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What is the meaning of capital cost?

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What is the concept of marginal cost of capital?

The marginal cost of capital (MCC) is the cost of the last dollar of capital raised, essentially the cost of another unit of capital raised. As more capital is raised, the marginal cost of capital rises.


Types of capital?

There are different types of capital in economics. Some of the common ones include financial capital, human capital, natural capital, instructional capital and social capital.


Is capital a fixed cost?

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Why is Weighted Average Cost of Capital important to an organization?

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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 are the objective of cost of capital?

objective of the cost of capital is to exercise control over the cost


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