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Business Terms and Jargon Explained

What is Cost of Capital

The cost of the funds used to finance investment. Firms generally raise finance for investment through either internal finance (reinvesting profits) or external finance (issuing debt or equity). The cost of external finance for a firm is given by the weighted average of the firm's costs of debt and equity.

© Crown Copyright. Material taken from HM-Treasury. Reproduced under the terms and conditions of the Click-Use Licence.

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Term created / updated 2007-03-20 22:43:21

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