Pääomakustannusprosenttia

Pääomakustannusprosentti, often translated as cost of capital percentage, is a crucial metric in finance and business valuation. It represents the average rate of return a company must earn on its investments to satisfy its investors, both debt holders and equity holders. Essentially, it's the weighted average of the cost of debt and the cost of equity.

The cost of debt is the interest rate a company pays on its borrowings. The cost of equity is the return shareholders expect for their investment in the company, considering the risk involved. These two components are weighted according to their proportion in the company's capital structure, meaning how much debt and equity the company uses. The resulting percentage reflects the overall expense of financing the company's operations.

Pääomakustannusprosentti is widely used in various financial analyses. It serves as a discount rate when calculating the net present value of future cash flows for investment appraisal. If a project's expected return is higher than the cost of capital, it is generally considered financially viable. Furthermore, it is used to evaluate the profitability of existing assets and to determine a company's overall valuation. A lower cost of capital generally indicates a more efficient and less risky company, which can lead to higher valuations.