The Cost of Capital pp 6-42 | Cite as
A General Introduction to Risk, Return, and the Cost of Capital
Chapter
Abstract
The cost of capital to a firm is the return1 investors receive on their investments. Therefore, in this context, an investor is anyone who lends money to a firm or agency in exchange for some ‘profit’. The providing of funds to the firm could be done by purchasing some of the company’s common stock, bonds,2 or in a number of additional ways we shall comment on later. The higher the profit desired by the investor, the greater the cost to the firm or paying agency.
Keywords
Discount Rate Cash Flow Financial Asset General Introduction Free Cash Flow
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© Eva R. Porras 2011