About Lesson
The cost of capital is the minimum return that a company must earn on all its investment projects, in order to satisfy various categories of investors who have provided capital to the company, such as shareholders, debenture-holders, bond-holders, term loan providers, etc. If the company does not earn the minimum required return for each such investor, they would be tempted to pull out their funds from the company, and the company may suffer a loss in its reputation and value.
In this chapter, we discuss different costs attached with their respective capital sources.