estimate a firm’s cost of capital? Definition: The cost of capital is the rate of return required by a capital provider in exchange for foregoing an investment in another project or business with similar risk. Thus, it is also known as opportunity cost. Need for Cost of Capital: To decide whether to go ahead with a certain project or not, we need to compare the cost of capital with the return on capital. When the return on capital is greater than cost of capital we go ahead with the project. What…
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