Terminology - Business - Cost of Capital

The opportunity cost of an investment; i e, the rate of return that a firm would otherwise be able to earn at the same risk level as the investment that has been selected.


For an example, when an investor purchases / trade stock in a firm, he / or she expects to see a return on that investment/trade. 

Since the individual expects to get back more than his / her initial investment / amount, the cost of capital is equal to this return that the investor/ trader receives, or  / the money that the firm misses out on by selling its stock.
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