| 单词 | cost of capital |
| 释义 | cost of capital The return, expressed in terms of an interest rate, that an organization is required to pay for the capital used in financing its activities. The capital of an organization can be a mix of equity share capital and debt. The cost of capital is the weighted average cost of capital, based on its particular mix of capital sources. The cost of capital is often used as a hurdle rate in discounted cash flow calculations. The weighted average cost of capital (WACC) is expressed in the formula: WACC = re (Ve/ (Ve + Vd)) + rd (1 -Tc) (Vd/ (Ve + Vd)), where re is the required returns on equity, rd is the required returns on debt, Tc is a firm's average corporation tax rate, Vd is the value of a firm's long-term debt, and Ve is the value of a firm's equity. |
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