{"id":18135,"date":"2022-02-08T08:30:00","date_gmt":"2022-02-08T13:30:00","guid":{"rendered":"https:\/\/einvestingforbeginners.com\/?p=18135"},"modified":"2023-12-13T15:43:37","modified_gmt":"2023-12-13T20:43:37","slug":"cost-of-capital-daah","status":"publish","type":"post","link":"https:\/\/einvestingforbeginners.com\/cost-of-capital-daah\/","title":{"rendered":"What is the Cost of Capital and How to Use It"},"content":{"rendered":"\n
Updated 12\/12\/2023<\/em><\/p>\n\n\n\n \n “I’ve never heard an intelligent discussion about ‘cost of capital.'”\n<\/p>\n\n\n\n \n The value of any company or investment is the present value of future cash flows, whether Microsoft, our home, or a piece of art. Part of determining the present value of future cash flows is defining the discount rate or hurdle rate to determine that present value. We do this by calculating the cost of capital or discount rate.\n<\/p>\n\n\n\n \n The cost of capital helps determine how much it will cost a company to invest in the business, and make no mistake, EVERY<\/strong> business must reinvest at some level to maintain its growth.\n<\/p>\n\n\n\n \n There is an opportunity cost for every investment, baseball card, or Visa. We use the cost of capital to determine those opportunity costs to help us decide whether to invest in those baseball cards or Visa.\n<\/p>\n\n\n\n \n In today’s post, we will learn:\n<\/p>\n\n\n\n Okay, let’s dive in and learn more about the cost of capital. <\/p>\n\n\n\n <\/p>\n\n\n\n \n The easiest way to define the cost of capital is the minimum rate of return a business must earn to create value for shareholders.\n<\/p>\n\n\n\n
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What is the Cost of Capital<\/h2>\n\n\n\n