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How does the company measure the required rates of return of investors or the opportunity cost of capital?

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How does the company measure the required rates of return of investors or the opportunity cost of capital?

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The market determines the required rate of return. This is established in the capital market by the actions of competing investors. The equilibrium rates for various securities is established by the demand and supply forces. From the shareholders point of view, the companys cost of capital is the rate of return required by them for financing the companys investment projects by buying various securities.

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