What is cost of equity and cost of Debt?


2 Answer(s)


Ishaan - Yes the friend is equally liable if the house could not be sold for a profit. We consider it as a cost in the WACC because, the friend is not giving you the money free of cost - he is expecting returns on that money. Whatever returns he is expecting is the cost of that money. even if it were your own money it would have a cost, since you would be expecting some returns on it.

WACC basically gives you an idea about what returns you will have to give your investors who are funding any project.

Hope that is clear.

Yes. Really well answered. Thanks a lot.