TeachMeFinance.com - explain Cost of capital
Cost of capital
The rate of return a utility must offer to obtain additional funds. The cost of capital varies with the leverage ratio, the effective income tax rate, conditions in the bond and stock markets, growth rate of the utility, its dividend strategy, stability of net income, the amount of new capital required, and other factors dealing with business and financial risks. It is a omposite of the cost for debt interest, preferred stock dividends, and common stockholders' earnings that provide the facilities used in supplying utility service.
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