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What is Understanding Cost of Capital about?
The cost of capital is the weighted average cost of all sources of funding used by a company, including debt, common shares, preferred shares, and retained earnings. It represents the minimum return that the company must earn on new investments to maintain the current value of the business. The cost of debt is calculated as the interest expense divided by the amount of debt. The cost of common shares is the dividend yield plus the expected growth rate of dividends. The cost of preferred shares is the annual
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- AngiEL
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- EN