If you could borrow all the money you need for a project at 6.5%, does that mean that the cost of capital for this project is going to be 6.5%?

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Business

Jaron Conner

17 November, 01:40

If you could borrow all the money you need for a project at 6.5%, does that mean that the cost of capital for this project is going to be 6.5%?

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Delaney Harmon · Answer 1

No, that does not mean that the cost of capital for this project is going to be 6.5%

In business, cost of capital means the total value lost when you decided to choose a certain investment over another.

In order to calculate it, you need to consider other factors beside interest rates, such as your equity to debt ratio and your tax rate