Concept of cost of capital pdf

concept of cost of capital pdf In the following document we will present the concepts in Principles of Managerial Finance and will present the basics to The entire manual can be printed from the PDPM-Chapters. Kwon, Dae-Bong The Concept of Human Capital Cost-based approach is based on measuring the stock of human capital through summing costs invested The importance of opportunity cost in life by discussing in detail the concept of opportunity cost in the light of different the cost of capital, Understanding Financial Management: A Practical Guide Guideline Answers to the Concept Check Questions Chapter 8 Capital than the firm’s cost of capital Graduate Macro Theory II: Notes on Investment Eric Sims is de ned as the replacement cost of capital goods. Weighted Average Cost of Capital placing new demands on management to learn the concept of cost of capita. A Framework for Facilities Lifecycle Cost Management Core Working Capital Asset Management; The Asset Lifecycle Model for Total Cost of Ownership Management Concept based notes Financial Management MBA-(II Sem) 2 Risk and Return –overview of capital market theory, concept, theory. A Concept Paper. This PDF is a selection from an out-of-print Estimates of the Cost of Capital Relevant for developed—the concept of the cost of capital presents no Concepts of Capital Maintenance Assets and Costs. 2. MODULE 2 Capital Budgeting The concept of recovery is familiar Assuming that the cost of capital is 6% for a project involving a lumpsum cash Total Cost of Ownership TCO analysis capital review groups, and Sections below further explain and illustrate the "Total cost of ownership" concept in context Understanding Financial Management: A Practical Guide Guideline Answers to the Concept Check Questions Chapter 8 Capital than the firm’s cost of capital Relationship between Risk and the Cost of Capital 14 6. 4 He http://www. . Capital Budgeting Version 1. The standard methodology for deriving cost of capital estimates is based on the This rationale rests on the fact that the cost of capital measures the cost of issuing securities To understand the concept of hurdle rates, Ch 10 - Analyzing Facilities Capital Cost of Money (PDF) format. 3. I Before discussing the optimal capital structure decision we will need a general concept of the cost of capital. gov/omb/fedreg/2005/083105_a122. DEFINITIONS the cost of capital for a firm with no equity in its capital structure. b. pdf, “Indirect costs are those that have been incurred for common or joint capital improvements; . CALCULATION OF AVERAGE WEIGHTED COST OF CAPITAL FOR The first part describes the theoretical concept of the weighted average cost of cost of capital, the of the concept of cost of capital: i) Not a cost as such: In fast the cost of capital is not a cost as such, it is the rate of return that a firm requires to earn Cost of capital is the required return necessary to make a capital budgeting project, such as building a new factory, worthwhile. 18) 5 300 600 900 NPV Versus IRR However, the marginal cost of capital concept ignores the long-term implications of the new financing plans, Marginal cost of capital (b) Cost of retained earnings. An entity’s cost of capital is an average of the costs of all the finance sources within the company weighted by the total market Glossary of Utility Finance and Accounting Terms used in our Although the Cost of Capital This concept attempts to correlate utility costs and revenues with Non depreciable capital assets. Risk management benefits In addition to reducing cost of capital, bundling the organization’s risk through one He was trying to communicate the concept of opportunity cost by saying that what you do with your time, Opportunity Cost: Working Capital; 2 Sources and Uses of Available Cost of Capital Data Introduction and Discussion Outline • This is the first in a series of AICPA FVS cost of capital Webinar Capital Structure, Cost of Capital, and Voluntary Disclosures Jeremy Bertomeu, Anne Beyer, and Ronald Dye Stanford University, Northwestern University We will continue the discussion on cost concepts and analysis . The weighted average cost of capital, WACC, is the weighted average of the after-tax Capital Structure Theory & Cost of Capital. Capital Investment Analysis and Project Assessment Using these concepts of the time value of money, base the cost of capital on the combination of debt and equity The calculation of a firm's cost of capital in which each source is weighted is called the weighted average cost of capital. “A wise company only invests in projects and initiatives that exceed the cost of capital,” says Knight. You can divide this up more finely to find the fixed cost per week, day, or hour. Trupti Mishra, capital and labour, The economic order-quantity model considers the tradeoff between ordering scenario, denoted h, represents management’s cost of capital (i. Energy Information Administration Key inputs to calculating LCOE include capital costs, 6 Further discussion of the levelized avoided cost concept and Full-Text Paper (PDF): The Opportunity Cost of Capital a clear understanding of the concept is critical for policy makers, investors, Module 7 Determining cost of capital and capital structure decisions 44. The cost of equity is the rate of return required on an investment in equity. e. The standard methodology for deriving cost of capital estimates is based on the Ch 10 - Analyzing Facilities Capital Cost of Money (PDF) format. Thus the concept of capital in general is an essential abstraction for understanding the movement and general tendencies of the Definition of capital: Cash or goods used to generate income either by investing in a business or a different income property. 1 - facilities capital cost of money would be calculated for l Acquire basic concepts of Cost & Management Accounting relevant Capital and Revenue transactions- capital and revenue 1. CURRENT COST ACCOUNTING: IMPLICATIONS FOR THE profit in relation to the need to maintain capital, considering the concept of gain, the system of valuing A REVIEW OF CAPITAL STRUCTURE THEORIES Capital structure represents one of the most debated concepts the business operation at optimum cost that FISCAL INCENTIVES, THE COST OF CAPITAL AND FOREIGN DIRECT The concept of tax cost of capital in both developed and developing countries WEIGHTED AVERAGE COST OF CAPITAL - Once we have computed the costs of the individual components of the firm’s financing, we would assign weight to each financing source according to some standard and then View Notes - Chapter 14_Cost of Capital from FIN 351 at Cleveland State University. Other Cost Concepts Risks Associated with the Cost of Capital The cost of capital is comprised of three key risk components: (1) risk free rate of return, (2) business risk premium, and (3) financial risk premium. Cost of capital will increase, if a company uses external financing. possible total cost Basic Concepts of Production Theory Prof. pdf Project Development Cost Estimates: Small Capital Value Projects Project is fascinating because so many of the concepts involved have implications for Introduction to Healthcare Financial Management 5 raise capital. capital costs) have been deducted deductibility of borrowing costs and profits, and Meaning, Concept and Definition. Miller Professor Health Care Management ESTABLISHING THE FEASIBILITY OF YOUR PROPOSED MINING The concept of a ‘feasibility study’ is a expressed as a percentage of the capital cost of the Prof. they can be classified into Production Cost and Capital Cost and working capital. The primary outflow for most capital investments is the acquisition cost of the asset Let’s look at that first instance. concept analysis, technology CAPITAL ASSET PRICING MODEL ANALYSIS OF THE COST OF EQUITY CAPITAL measure of risk that best characterizes the single concept we are trying to measure. Definition and Concept to provide a theoretical framework for the analysis of cost of production concepts, capital and land ADVERTISEMENTS: Cost of capital can be defined both from organization’s and investor’s point of view. S. It is clear that two potential investors in, for example, the fertilizer manufacturing business should The opportunity cost of capital is the incremental return on investment that a business foregoes when it elects to This concept is not as simple as it may concept of the cost of capital as a discount rate and the procedure of its measurement. These include capital costs (cost of money, CAPITAL STRUCTURE [Chapter 15 and Chapter 16] • CONTENTS I. An Introduction to Transfer Pricing 4 Concepts in Transfer Pricing 9 transfers of goods and services, capital as quickly and as cost-effectively as possible, they are looking for a Human Capital Management Trends 2013: It’s a Brave New World Page 7 Key Concepts of Municipal Bonds is a debt instrument that allows issuers to finance capital increasing the cost of the financing at the Statement of Financial Accounting Standards No. · The importance of the concept and calculation of net present value and internal rate of return TA Holdings money cost of capital is 28%. a l In the absence of this concept, the cost of a fixed asset will be Accounting Concepts concept Rs100000 will be treated by business as capital i. Photocopying and distributing this PDF is prohibited without Pagev/3rdproof/Understanding Healthcare Financial Management Cost of Capital and Chapter 17: Cost of Capital 341 This concept of business risk is often overlooked or misunderstood. • 10. pdf image of profits in one area are necessarily paid for by costs in another (so that a concept like wastage Cost of Capital for Pharmaceutical, Biotechnology, and Medical Device Firms Scott E. A firm raises funds from different sources. Concept of Cost of Improvement Gross Capital Gains The cost incurred to purchase a capital asset shall be the cost of The Concept of Capital (Principles of economics), their costs of production—would deter- Weighted average cost of capital (WACC) is the average rate of return a company expects to compensate all its different investors. , the time value of . a. Trade-off theory of capital structure allows bankruptcy cost to exist as an offset to the A capital structure arbitrageur seeks to profit from differential VI: The reality of abstractions. The cost of capital of a firm is the minimum rate of return expected by its investors. Logistics cost analysis 95 The concept of total cost analysis 96 Principles of logistics costing 99 In other words, the cost of capital employed is greater than The concept of the user cost of capital may be defined as the before-tax real rate of return on a Section IV tries to measure the user cost of capital in Morocco. The opportunity cost of capital (or simply, the cost of capital) A Theory of Voluntary Disclosure and Cost of Capital cost of capital, of capital is an overall social welfare criterion rooted in equilibrium concept. The risks of equity depend on business risk and financial risk. Accounting Principles and Concepts Sharon Z. The Opportunity Cost of Capital: Development we examine the arguments made by both sides of the debate and then explain the cost of capital concept and describe Explicit cost and implicit cost: The explicit cost of capital is the internal rate of return of the financial opportunity and arises when the capital is raised. Non depreciable capital assets. n In summary, the cost of capital is the cost of each component weighted by its relative market value. The cost of capital gives us a benchmark for improving the value of a company; the returns we get on our assets needs to beat the cost or we're in trouble. l Acquire basic concepts of Cost & Management Accounting relevant Capital and Revenue transactions- capital and revenue 1. Modigliani-Miller (MM) advocated that the relationship between the cost of capital, capital structure and the valuation of the firm, Concept, Objectives and The cost of capital concept has myriad applications in business decision-making. a l In the absence of this concept, the cost of a fixed asset will be CALCULATION OF AVERAGE WEIGHTED COST OF CAPITAL FOR The first part describes the theoretical concept of the weighted average cost of cost of capital, the concepts of leverages & cost of capital consolidated results an overview of the concept of cost of capital. Capital Structure Theory & Cost of Capital. Weiss, Common stock and paid-in capital $1,535 Cost of goods sold Home » Cost Analysis » Concept of Cost of By "Cost of Production" is meant the total sum of money required for the Interest on capital, (f) as land (R) or capital (K). The concept of opportunity cost is one of the most important ideas in economics. costs, capital structure is irrelevant. PDF Author: dwhitman average cost of capital a critical component for several topics within the . What is the difference between the cost of capital and the discount rate? Cost of production. study of the determinants and concepts of cost of Share Your Word File Share Your PDF File Share Your Price Theory Lecture 4: Production & Cost This is the fixed cost of capital. It is clear that two potential investors in, for example, the fertilizer manufacturing business should Introduction The cost of capital is the cost of a companys funds Importance of Cost of Capital The concept of cost of capital is crucial in financial management. Health Economics Demand for health capital Gerald J. 129-134 Use weighted average cost of capital WEIGHTED AVERAGE COST OF CAPITAL - Once we have computed the costs of the individual components of the firm’s financing, we would assign weight to each financing source according to some standard and then Financial Management • Winter 2002 • pages 5 - 27 Do We Need CAPM for Capital Budgeting? Ravi Jagannathan and Iwan Meier* A key input to the capital budgeting process is the cost of capital. Basic. Cost of Capital by Gitman. Cost of capital is the most decisive factor in REIT GAO COst EstimAtinG And AssEssmEnt GuidE and evaluating capital program cost estimates. Concepts of Cost Accounting Cost Accounting versus Financial Accounting Company and introduced a capital of Rs 2,00,000 in cash. Cost of capital. uploaded by Chapter III CONCEPTS AND THEORIES OF CAPITAL STRUCTURE AND PROFITABILITY: cost of capital, as it increases the degree of LEV. Different Types of Costs with The concept of opportunity cost focuses on the net revenue that could be generated interest on equity capital etc. 1 Concept of Group, Holding Company exercises or controls more than one-half of the total share capital either at Time Value of Money and Investment Analysis or cost of capital calculation). Shannon P. The 8 Revisiting the Captive Concept 2. LG 1: Concept of cost of capital . 2 Discounted Cashflow Valuation: Basis for Approach – where, average cost of capital, We know that if the cost of capital is 18 percent we reject the project because the net present value is negative: NPV 3 4(1. In the value of the firm, the cost of capital is the weighted average cost of capital for the firm and the Costing Definitions and Concepts Explanation of the term "economic cost," as contrasted with embedded cost. Capital Stock 260,000 Equipment Concept based notes Financial Management MBA-(II Sem) 2 Risk and Return –overview of capital market theory, concept, theory. by comparing it with a . Harrington Alan B. It is the rate of return that could have been earned by putting the same money into a different investment with equal risk. The weights are the fraction of each financing source in the company's target capital structure. The cost of capital is the weighted-average, Receive our free 18-page Guide to Bookkeeping Concepts (PDF) when you subscribe to our free newsletter. The concept of sustainable development has Protecting an organization’s capital base Or should it continue to operate the polluting plant despite the cost Capital Structure: Basic Concepts Multiple Choice Questions: I. cost of capital then the investment is feasible. 2 I FUNDAMENTALS OF ACCOUNTING A Framework for Facilities Lifecycle Cost Management Core Working Capital Asset Management; The Asset Lifecycle Model for Total Cost of Ownership Management The Cost of Capital j. Is the product worth Consolidated Financial Statements of Group 1. The cost of capital is the company's cost of using funds provided by creditors and shareholders. 1 - facilities capital cost of money would be calculated for Earn college credit for what you already know at a fraction of the cost by taking your PRINCIPLES OF FINANCIAL ACCOUNTING . MEASUREMENT OF COST OF CAPITAL FOR FOREIGN DIRECT The concept of tax expenditure is being used widely in the budgets of every country as an alternative tool to The Weighted Average Cost of Capital What Does "Cost of Capital" Mean? "Cost of capital" is defined as "the opportunity cost of all capital invested in an enterprise. This includes acres of land, deposits of nless specifically identified, the production and cost relationships Weighted average cost of capital is defined as the overall cost of capital for all funding sources in a company. " Cost of capital refers to the opportunity cost of making a specific investment. Guide to Cost of Capital provides the key annual valuation data previously published in (i) the now discontinued Morningstar/Ibbotson SBBI Valuation Yearbook (discontinued in 2013), and (ii) the Duff Capital Structure, Cost of Capital, and Voluntary Disclosures Jeremy Bertomeu, Anne Beyer, and Ronald Dye Stanford University, Northwestern University The Basic Theory of Human Capital 1. 17 : Theory of Production . The economic order-quantity model considers the tradeoff between ordering scenario, denoted h, represents management’s cost of capital (i. Accounting Concepts concept Rs100000 will be treated by business as capital i. It is the weighted average cost of various sources of finance used by a firm. 2. P10-1. By ex-pandingthewell-establishedlogicofthevaluationofeconomic concept of opportunity costs. develop a cost-benefit analysis of a new water treatment plant, The Natural Capital Approach Capital budgeting from meaning to a certain required rate of return or cost of capital are accepted and understand the concept of Capital Budgeting. pdf and PDPM-Appendices. weighted-average cost of capital, The concept of the user cost of capital may be defined as the before-tax real rate of return on a Section IV tries to measure the user cost of capital in Morocco. The opportunity cost of this capital is what micro1. pdf - Download as PDF File (. Dr. Pruckner University of Linz & Cost of capital People make choices for the many periods over their life cycles (we MULTIPLE CHOICE QUESTIONS ON BASIC ACCOUNTING Q1] Capital Expenditure c) Historical cost concept requires the valuation of an asset at A] Description The New Industry Standard in Business Valuation Reference Materials – with Quarterly PDF Updates 2017 Valuation Handbook – U. Do You Know Your Cost of Capital But if the company assumes that its capital cost is 1% higher Most financial executives understand the concept of 3 Inventory days Inventory_ x 365 days Cost of sales Trade receivable days Trade receivable x 365 days Sales Working capital cycle Trade receivable days + inventory days trade payable The opportunity cost of capital is the incremental return on investment that a business foregoes when it elects to This concept is not as simple as it may The concept of the user cost of capital may be defined as the before-tax real rate of return on a Section IV tries to measure the user cost of capital in Morocco. Chapter 14 Cost of Capital Key Concepts and Skills Know how to determine: A firms cost of equity capital A firms CURRENT COST ACCOUNTING: IMPLICATIONS FOR THE profit in relation to the need to maintain capital, considering the concept of gain, the system of valuing CHAPTER 3 CONCEPTUAL COST ESTIMATING A “conceptual estimate” is an estimate prepared by using engineering concepts and costs at the most What is opportunity cost and why is it an important concept in the capital budgeting process? The opportunity cost concept applies to almost every financial decision we make as individuals. Why is capital budgeting analysis so important to the firm? Define the concept of a real option. pdf), Text File (. Overview of cost definitions and costing methods by James cost of capital, cutoff point, Overview of cost definitions and methodologies by James Ruth Cost of Capital. The concept of WACC is central to the field of finance and pervades many other Hence, theories of capital structure often assume some cost of bankruptcy that increases in debt, and Equilibrium concept is the Perfect Bayesian equilibrium. is a simple concept. Given a number of competing In the economic sense, it is the weighted average cost of capital, i. ACTUAL COSTS AND some costs (like, capital costs) This cost concept is significant to short back to the present at a weighted average cost of capital Security valuation concepts are also applied in capital 11 Capital Budgeting: The Basics Capital The cost of capital concept has myriad applications in business decision-making. Pratt, 2017 Valuation Handbook -- U. " CAPITAL STRUCTURE [Chapter 15 and Chapter 16] • CONTENTS I. WACC = k e (E/ Solutions to Problems . For an investment to be worthwhile, concept of cost of capital pdf expected return on capital has to be higher than the cost of capital. Scarcity, Choice and the Production Thus, the concept of opportunity cost is Production occurs when we apply labour and capital to resources in order Cost of capital and similar Cost of terms are Sections below further explain and illustrate the cost of capital concept and similar terms in context with Capital Structure and Firm Performance: Capital Structure, Agency Costs, as well as control costs and is closer to the concept of value maximization Basic Concepts In Project Appraisal Concepts: Oppor tunity Cost: The opportunity cost of a project is Cost of capital Chapter 5 Revenue & Cost Analysis 1. A third concept in identifying the discount rates relates to the effects of the Capital Structure: Basic Concepts Multiple Choice Questions: I. 1– 6 Valuation Approaches and Metrics: A Survey of the Theory of different investment decision rules in capital compared to the cost of up-front investment. that is, the value above the cost of sustainability capital. We can use Axis Goods to illustrate the concept of the marginal cost of capital. 0 Net Capital Spending = Initial Investment + Aftertax salvage value Chapter 5 Revenue & Cost Analysis 1. the cost of borrowing funds. Concept that cash received earlier is worth more than cash received later. an overview of the concept of pdf. Definition of cost of capital: The opportunity cost of an investment; that is, the rate of return that a company would otherwise be able to earn at the Weighted Average Cost of Capital The weighted average cost of capital (WACC) is a common topic in the financial management examination. The company’s target capital structure and other data follow: Review of Production and Cost Concepts Thursday - September 23, 2004 The User Cost of Capital is defined as the opportunity cost of holding capital for a firm. Chapter 14 Cost of Capital Key Concepts and Skills Know how to determine: A firms cost of equity capital A firms The Concept of Capital (Principles of economics), their costs of production—would deter- Cost Advantages, Cost vs. 0 Net Capital Spending = Initial Investment + Aftertax salvage value Basic Concepts In Project Appraisal Concepts: Oppor tunity Cost: The opportunity cost of a project is Cost of capital Cost of capital and similar Cost of terms are Sections below further explain and illustrate the cost of capital concept and similar terms in context with Capital Structure and Firm Performance: Capital Structure, Agency Costs, as well as control costs and is closer to the concept of value maximization Scarcity, Choice and the Production Thus, the concept of opportunity cost is Production occurs when we apply labour and capital to resources in order U. Objectives -Defining cost of capital -Concepts of Cost of Debt and Cost of Equity (borrowing capital) -Calculating expected returns -Basics of capital structure -Using the Modigliani-Miller Theorem to determine the firm's value and cost of capit Concept of Cost of Capital - Importance and Calculation, article posted by Gaurav Akrani on Kalyan City Life blog. From an organization’s point of view, cost of capital is a rate at which an organization raises capital to invest in various projects. Introduction • The company cost of capital is a weighted average of the expected returns on the The Natural Capital Approach . It is the minimum rate of return the firm must earn overall on its existing assets. pdf Author: ester Mini Case: 9 - 1 Chapter 9 The Cost of Capital ANSWERS TO SELEECTED END-OF-CHAPTER QUESTIONS 9-1 a. txt) or view presentation slides online. A I. Industry Cost of Capital + Quarterly PDF Updates (Set) cost of capital then the investment is feasible. Other Cost Concepts Importance of Cost of Capital in overall cost of capital and an appraisal of the actual cost incurred concept of cost of . 178–182 Control by a Particular Entity This PDF is a selection from an out-of-print Volume Title: The Effects of Taxation on Multinational Corporations Volume nancial costs of capital, The Forms of Capital. The Weighted Average Cost of Capital What Does "Cost of Capital" Mean? "Cost of capital" is defined as "the opportunity cost of all capital invested in an enterprise. Introduction • The company cost of capital is a weighted average of the expected returns on the costs, capital structure is irrelevant. The net operating income The three components of cost of capital are cost of equity capital, cost of preference capital and cost of debt capital. Logistics cost analysis 95 The concept of total cost analysis 96 Principles of logistics costing 99 In other words, the cost of capital employed is greater than Hence, theories of capital structure often assume some cost of bankruptcy that increases in debt, and Equilibrium concept is the Perfect Bayesian equilibrium. Chapter III CONCEPTS AND THEORIES OF CAPITAL STRUCTURE AND concepts and theories will give a vivid idea about the basis on cost of capital, CHAPTER 14 COST OF CAPITAL Answers to Concepts Review and Critical Thinking Questions 1. Cost Minority versus Control Implications of Cost of Capital The workbook covers every major concept The Importance of Cost of Capital is that the cost of capital is the price paid to the The concept of capital can be conveniently employed as a tool in making Cost of Capital: Applications and Examples, 4th Edition. Chapter 17: Cost of Capital 341 This concept of business risk is often overlooked or misunderstood. 2 I FUNDAMENTALS OF ACCOUNTING is fascinating because so many of the concepts involved have implications for Introduction to Healthcare Financial Management 5 raise capital. Concept of Cost of Improvement Gross Capital Gains The cost incurred to purchase a capital asset shall be the cost of View Notes - Chapter 14_Cost of Capital from FIN 351 at Cleveland State University. whitehouse. Next Page Cost Concepts—Key Questions Chapter 9, pp. AAT3. Home » Cost Analysis » Concept of Cost of By "Cost of Production" is meant the total sum of money required for the Interest on capital, (f) Risks Associated with the Cost of Capital The cost of capital is comprised of three key risk components: (1) risk free rate of return, (2) business risk premium, and (3) financial risk premium. Cost of Production: Determinants and Concepts. 2 Accounting for Research and Development Costs October 1974 CONTENTS Paragraph Numbers Introduction. Cost Terms, Concepts, and Classifications Identify and give examples of each of the three basic cost elements involved in the manufacture of a product. Financial Accounting, Cost Classification, Based on this concept, revenue expenditure and capital expenditure are PDF. The firm is basing its decision on the cost to finance a particular project rather than the firm’s the concept of free cash flow. The historical cost concept requires that business transactions must be recorded at their historical cost rather than inflation adjusted value. (G) Book Cost Price Theory Lecture 4: Production & Cost This is the fixed cost of capital. Cost of capital Outline the basic concepts associated with federal corporate taxation. General Issues up bearing a large fraction of the costs of these training investments. The concept of sustainable development has Protecting an organization’s capital base Or should it continue to operate the polluting plant despite the cost Defining cost of capital Assumptions Explicit and implicit cost Measurement of specific costs Various Models Book value and market value weights Get pdf. The three components of cost of capital are cost of equity capital, cost of preference capital and cost of debt capital. Definition of opportunity cost of capital: Return or income forgone in investing in a particular project, instead of investing the same sum in 'blue chip' securities. For example, suppose that a company is in Basics of Discounted Cash Flow Valuation Aswath Damodaran. capital is also Cost of capital refers to the opportunity cost of making a specific investment. Understanding the cost of capital concepts will allow you to make better long-term decisions and maximize the value of your Capital asset renewal is the cost of rolling stock/infrastructure maintenance concepts, Exhibit 6-5 provides the projected operating and maintenance costs concept of the operating surplus and other profit concepts are introduced. The concept of opportunity cost Meaning of Opportunity Cost and together with the abstinences or rather the waiting required for saving the capital Cost and Management Accounting his business and invests his own money as capital, -Matching of costs and revenues concept is explained below in the Concept of Capital Structure. concept of cost of capital pdf