Ch 12 Cost of Capital
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cost of equity
The return that equity investors require on their investment in the firm
cost of debt
The return that lenders require on the firm's debt.
weighted average cost of capital (WACC)
The weighted average of the cost of equity and the aftertax cost of debt.
pure play approach
Use of a WACC that is unique to a particular project, based on companies in similar lines of business.
