194 FInAnCIAl MAnAGEMEnT FoR non-FInAnCIAl MAnAGERS The cost of capital may therefore relate to the cost of funds that a company uses, bearing in mind the return that investors expect and require. It is the minimum return that a company needs to make in order to pay investors their expected returns. It has been described as the opportunity cost of finance, since it is the minimum that investors require for the level of risk they are accepting. If investors do not get this required return they will put their funds elsewhere. Risk and the cost of capital The cost of capital will increase as perceived risk increases. Risk-free rate of return If there is no risk on an investment, as is the case with government securities for example, then the rate of return will be the lowest in the market. This is the risk-free rate.