Cost of capital????????

Hello gaurav

cost of capital is a huge topic. what do you want to know?

Cost of capital means the cost incurred to raise the capital requirements of the business.

A company issues equity, preference share capital to meet the capital requirements.

Also it issues debentures and procure loans from various institutions to meet the capital needs.

All these sources of funds carry a cost with them.

For eg: in case of debentures and loan the rate of interest to be paid is the cost. now, debentures are perpetual and redeemable. their treatment are different.

In case of prefernce share capital also one has to pay fixed rate of dividends. It is also perpetual or redeemable so treatment is different.

Equity share capital is the costliest one for which their are various ways to calculate cost.

Regards

Rahul Gupta