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The cost of capital is a starting point of setting up a new project for a...

The cost of capital is a starting point of setting up a new project for a company.Which costs should be included and why?Marginal or historical?

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It is the marginal costs which should be included or considered while calculating the cost of capital. The marginal cost of capital is the cost a company is required to incur for issuing additional one unit of equity or debt. It is necessary to consider its incremental effects to reduce their overall financing costs. In addition, it is widely used to determine if the project should be financed through equity or debt financing. It presents the way balance sheet is affected by the issuing additional equity and debt.

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