This document discusses the cost of capital. It defines cost of capital as the minimum rate of return that a firm must earn on its investments to maintain its value. Cost of capital has several components, including the return at zero risk, and premiums for business risk and financial risk. The document also discusses the different types of capital like debt, equity and retained earnings, and how to compute the cost of each. It explains weighted average cost of capital is calculated by weighting the costs of different sources of capital by their proportions.