what is a cost of capital

Question

Deferred consideration, Business combinations

Answer 1

Cost of capital means to the opportunity cost of a specific investment. It is the rate of return that could have been earned by putting the same money into a different investment with equal risk. Thus, the cost of capital is the rate of return required to persuade the investor to make a given investment

Answer 2

Cost of capital means the percentage of return an investor will expect from making the investment. If you are talking from accounting, it means different things in different conetext - for impairment this means cost of raising debt funds, for esops this means cost of equity capital.