What is Cost of Capital ?

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Accepted Answer

Cost of capital is the minimum return a company must earn on its investments to satisfy its investors.

It is the rate of return that a company must earn on its investments to maintain or increase its share price.
It is used to evaluate new projects or investments to determine if they will generate enough return to meet the cost of capital.
It is calculated by taking the weighted average of the cost of debt and the cost of equity.
The cost of debt is the interest rate a company pays on its debt, while the cost of equity is the return required by investors to compensate for the risk of investing in the company.
If a company's return on investment is less than its cost of capital, it is not creating value for its investors.
For example, if a company's cost of capital is 10%, it must earn at least 10% on its investments to satisfy its investors.
The cost of capital is an important concept in corporate finance and is used to make investment decisions and evaluate the financial performance of a company.