Daily responsibilities of managers include making business and financial decisions that determine the long-term direction of the company's operations. Financial decisions about long-term investments in real tangible assets are a demanding task for company managers. It is important that the key staff has adequate competence and knowledge about the procedure and methods of capital budgeting for assessing the profitability of investments and the expected effects of investments. The concept of cost of capital is analyzed as an investment framework and determinant in the capital budgeting process. This master thesis "The cost of capital as the investment framework determinant in the capital budgeting process" provides an overview of the observed terms and connects them to the real business sector in order to assess the level of knowledge and competence of key staff in the area of capital budgeting. The complexity of the capital budgeting process and the need to make adequate business and financial decisions require applicable managerial knowledge. Data on the competencies of the key staff of small and medium-sized enterprises in this work were collected through individual interviews, using the in-depth interview method. Analysis of the content of the conducted research confirms managerial competences.