Copyright

What are the three components of the cost of capital?

Question:

What are the three components of the cost of capital?

Cost of Capital:

The cost of capital is the cost that is incurred while collecting the types of capital. The capital can be the debt capital or the owners' capital. The debts capital includes loans, debentures, etc and the owners' capital includes shareholders' funds and the retained earnings.

Answer and Explanation:

The three components of the cost of capital:

  • Cost of Debt = Interest rate
  • Cost of Preference share = Dividend per share
  • Cost of Equity share = Dividend per share

Learn more about this topic:

Loading...
Financial Policy & the Cost of Capital

from Finance 101: Principles of Finance

Chapter 14 / Lesson 2
4.1K

Related to this Question

Explore our homework questions and answers library