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cost of capital
The amount a firm must pay the owners of capital for the privilege of using it. This includes interest payments on corporate debt, as well as the dividends generated for shareholders. In deciding whether to proceed with a project, firms should calculate whether the project is likely to generate sufficient revenue to cover all the costs incurred, including the cost of capital. Calculating the cost of equity capital can be tricky (see capital asset pricing model and beta).
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- Part of Speech: noun
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- Industry/Domain: Economy
- Category: Economics
- Company: The Economist
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