Capital Cost Rate

Capital cost rate refers to company The ratio between capital expenditure and effective financing is usually expressed in terms of percentages. In the practice of company financing, the relative cost of capital cost is usually used, that is, capital cost rate.

Types of capital cost rate

Generally speaking, capital cost The rates are as follows:

1. individual capital cost rate

The rate of individual capital cost refers to the cost rate of various long-term capital of a company. For example, stock capital cost rate, bond capital cost rate, long term loan capital cost rate. When comparing various financing methods, companies need to use the cost ratio of individual capital.

The ratio of individual capital cost is the ratio of company's capital cost to effective financing. his basic The calculation formula is as follows:

Or:

Formula: K - capital cost rate expressed in percentage.

D - use tariff;

P - the amount of financing;

F - the amount of financing.

F - the ratio of financing fees, that is, the ratio of raising fees to the amount of funds raised.

2. comprehensive capital cost rate

The comprehensive capital cost rate refers to the cost ratio of all long-term capital of a company. It is usually weighted by the proportion of various long-term capital and weighted average calculation of the cost rate of individual capital, so it is also called the weighted average cost of capital ratio. Therefore, the comprehensive capital cost rate is determined by the two factors of individual capital cost rate and long-term bond capital cost rate.

3. marginal capital cost rate

The marginal capital cost rate refers to the capital cost rate of the company's additional capital raising, that is, the cost that the company adds to the cost of one yuan capital.

The company's additional fundraising may sometimes take only one form of financing. When the amount of financing is large or the target capital structure is set, it is often necessary to combine various financing methods. At this point, the marginal capital cost rate should be calculated by the weighted average method, and its capital ratio must be determined by market value.