Financial Terms Glossary

Cost Of Capital

Formal

The percentage rate, or minimum rate of return, that is required by a company, in deciding whether to spend money investing in a project. Derived from a calculation of a company's own 'cost of capital' based upon percentage returns demanded by providers of debt and equity to that company itself.

Informal

A type of interest rate - that dictates the minimum amount of profit or interest that is needed before monies are committed to a project or investment. If the projected result delivers a percentage which is below your own cost of capital - then there's no point in doing it really.

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