what is the cost of capital
Investopedia explains Cost of Capital. The cost of capital influences the ways in which a company can raise money (through issuing stock or bonds or a mix of the two). Cost of capital is essentially the rate of return that a firm would receive if it invested in a different vehicle with similar risk.or example, if a person has $10,000 to invest and must choose between Stock A and Stock B, the cost of capital is the difference in their returns. If that person invests $10,000 in Stock A and receives a 5% return, while Stock B makes a 7% return, the cost of capital is 2%.