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hi john,
for the definition of cost of capital, can i understand as the opportunity cost of making an investment ?.
A rate that could have been earned by an investor if the money were put in to the investment with same risk ?
That is not the definition.
The rate the investors want determines what the company has to pay (and therefore the cost to the company), but insofar as debt finance is concerned the company gets tax relief which makes the cost to the company lower.
Please do watch my free lectures on all of this 🙂
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