Cost Of Capital Financial Glossary

What is it? Definition Expected rate of return used to evaluate your business opportunity. The Cost of Capital represents what investors expect to earn on their investment taking into consideration the risk and volatility of your company/industry. Volatility doesnt mean your business is good or bad. Great businesses can be highly volatile; but volatility does create uncertainty. The greater the uncertainty, the higher the Cost of Capital needed to adequately compensate investors. Also known as K, WACC, discount rate, hurdle rate.

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