Question

Difference between specific cost of capital and overall cost of capital

Answer 1

QUESTION:-

Difference between specific cost of capital and overall cost of capital.

ANSWER:-

Difference between Specific Cost Of Capital and Overall Cost Of Capital are:-

• The specific cost of capital is the cost of a certain source of the fund like the cost of debt, cost of preference capital, cost of equity and cost of retained earnings. Whereas, Overall cost of capital is the weighted average cost of specific costs of cap­ital.

• The specific cost of capital is the cost that a company becomes liable for the funds that are generated through a specific source. Whereas, the overall cost of capital is the cost which the company generates for its cumulative financing.

• The cost of all the elements of capital is known as Specific Capital Costs. Whereas, the overall cost of capital is also known as the Weighted average cost of capital (WACC) or ‘Average cost of capital.

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