C
curiousactuary
Member
What is the cost of capital rate is it either:
1. The rate of return required by shareholders if they invested the capital freely?
2. The shareholder's rate of return in excess of the risk-free rate of return?
For example:
Shareholders can get a return of 10% from investing freely in equities.
The risk-free rate of return is 2%.
Is the cost of capital rate 10% or 8%?
1. The rate of return required by shareholders if they invested the capital freely?
2. The shareholder's rate of return in excess of the risk-free rate of return?
For example:
Shareholders can get a return of 10% from investing freely in equities.
The risk-free rate of return is 2%.
Is the cost of capital rate 10% or 8%?