components of cost of capital
Components of Cost of Capital. The term cost of capital refers to the maximum rate of return a firm must earn on its investment so that the market value of companyâs equity shares does not fall.This is a consonance with the overall firmâs objective of wealth maximization.hus, a firmâs cost of capital may be defined as âthe rate of return the firm requires from investment in order to increase the value of the firm in the market placeâ.