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Marginal cost of finance

This is cost of new finances or additional cost a company has to pay to raise and use additional finance (Cornelius P and Kogut B (2003)) It is given by: Total cost of marginal finance x 100 Cost of finance (COF) This concept is very important especially when the firm must raise additional finance to finance the project. It considers the new finance only in its computations and hence is a future cost which we can compare with future inflows.

The amount to be received should be discounted to the present using this marginal cost of finance so that the initial cost can be comparable to the cash inflows. REFERENCES Cornelius P and...

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... Kogut B (2003), Corporate Governance and Capital Flows in a Global Economy, Oxford University Press, Oxford. Cowan R. , P. A. David & D. Foray, (2000. ) The explicit economics of codification and tactness. Industrial and corporate change,

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