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Cost of Capital refers to the required return necessary to make a capital budgeting project, such as building a new factory or purchasing a piece of equipment, worthwhile. It is the rate of return that a company must earn on its investments to maintain the market value of its stock and satisfy its creditors. The cost of capital is influenced by factors such as interest rates, market conditions, and the company's own financial health. It is a crucial concept in financial decision-making, as it helps determine whether a project or investment is financially feasible.