on capital is called 'cost of capital'
Hello,
Cost of capital is the required return crucial to make a capital budgeting project, such as building a new factory, valuable. When analysts and investors review the cost of capital, they generally mean the weighted average of a firm's cost of debt and cost of equity combined together.
The cost of capital metric is used by companies internally to determine whether a capital project is worth the expenditure of resources, and by investors who use it to decide either an investment is worth the risk in comparison to the return or not. The cost of capital depends on the method of financing utilized. It mentions the cost of equity if the business is financed only through equity, or the cost of debt if it is financed only through debt.
Hope this helps......
