Cost of Capital

Cost of Capital and International Trade Economy

In relation to international trade economy, Christopher Mark (1993) provided the following definition of Cost of Capital: For any given level of corporate risk, the cost of capital faced by f1rn1s in a given country –a key element of their competitiveness –is essentially determined by four factors: (1) interest rates, or the cost of borrowing, prevailing in the country; (2) tax policies, including tax credits, depreciation schedules that mayor may not be faster than the true rate of economic depreciation, and the tax deductibility of interest costs; (3) .the firms’ capital structure or financial leverage –since they may raise funds not only from borrowing but from equity, i.e., retained earnings and new stock issues, which normally has a higher cost that debt financing; and (4) the financial structure of industry – -including “risk pooling” among affiliated firms and banks –and firms’ access to domestic and international capital markets.

Hierarchical Display of Cost of capital

Business And Competition > Accounting > Management accounting > Costing
Finance > Financial institutions and credit > Credit policy > Cost of borrowing

Cost of capital

Concept of Cost of capital

See the dictionary definition of Cost of capital.

Characteristics of Cost of capital

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Resources

Translation of Cost of capital

• Spanish: Coste de capital
• French: Coût de capital
• German: Kapitalkosten
• Italian: Costo del capitale
• Portuguese: Custo de capital
• Polish: Koszty materiałowe

Thesaurus of Cost of capital

Business And Competition > Accounting > Management accounting > Costing > Cost of capital
Finance > Financial institutions and credit > Credit policy > Cost of borrowing > Cost of capital

See also

• Cost of borrowing
• Interest
• Interest rate subsidy