Cost of capital (资本成本 zī běn chéng běn) refers to the rate of return the firm expects to earn from its investment. It can be understood as the opportunity cost of making a specific investment decision.
Part 1: Breakdown of Words
- “Capital” (资本 zī běn) as in “venture capital” (风险资本 fēng xiǎn zī běn).
- “资” (zī) as in “assets” (资产 zī chǎn), “investment” (投资 tóu zī), or “funds” (资金 zī jīn).
- “本” (běn) as in “fundamental” (根本 gēn běn), “instinct” (本能 běn néng), or “skill” (本领 běn lǐng).
- “Cost” (成本 chéng běn) as in “opportunity cost” (机会成本 jī huì chéng běn).
- “成” (chéng) as in “success” (成功 chéng gōng), achievements” (成就 chéng jiù), or “composition” (组成 zǔ chéng).
- “本” (běn) as in “fundamental” (根本 gēn běn), “instinct” (本能 běn néng), or “skill” (本领 běn lǐng).
Part 2: Examples
- Weighted Average Cost of Capital (加权平均资本成本 jiā quán píng jūn zī běn chéng běn).
» Add a new term or correction« Back to Glossary Index