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  • Jun 25, 2012, 05:14 PM
    ParrotBird48516
    Cost of capital
    Is the cost of capital the same as charge for capital?
    Thank you.
  • Jun 25, 2012, 06:08 PM
    paraclete
    Quote:
    Originally Posted by ParrotBird48516 View Post
    Is the cost of capital the same as charge for capital?
    Thank you.
    The cost of capital is usually the weighed average of what the shareholders funds could earn at the risk free rate and the cost of borrowings. If this calculation is used in an EVA calculation the risk free rate must be modified by the industry risk factor which is usually messured by how far the price of the companies securites diverges from the market. A company whose securities showed twice the volatility of the market would have a risk factor of 2

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