Page 6 - PowerPoint Presentation
P. 6
COST OF CAPITAL
Overview
• Remember that the cost of capital for the company is
merely a mirror image of the fair rate of return required by
the investor.
• Interest paid by the company = interest received by the
investor.
• Dividends paid by the company = dividends received by the
investor.
• WACC represents the return that a company needs to
achieve in order to fully compensate the debt and equity
providers of the company (it is the cost to finance the
company).
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