There are several relevant expenses which are associated with the measurement of a company’s cost of capital. These expenses are as follows-
A marginal cost is the average value of new or bonus funds which have been collected by organization. It is the present interest on long term debt.
It is the expense when all sources like equity, debt and preference are taken into consideration. It is even known as weighted expenditure or average expense of capital.
As its name suggests, it is the type of cost which is associated with the specific component of the company’s capital structure.
It refers to expenses which exist in the capital market at a certain point of time.
These expenses are evaluated on the basis of the present capital structure of a company.
Fund prices which finance an expected investment are known as Future capital cost.
An expenditure which has already taken place but not shown as a separate expense is known as the implicit capital cost. It is an opportunity price which is regarded as the rate of return related to the best financial opportunity of an investment.
It is a discount rate that is equal to the present inflow of cash which are incremental to take the finance opportunity with existing value of cash outflows.
Normalised expenditure is a long term price which depicts an estimation of total value with the help of a process of averaging by removing cyclical elements.
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