Asked by Horacio Nicolas on Jun 26, 2024
Verified
The cost of capital can be described best as the:
A) rate a firm pays for the use of invested funds.
B) the minimum return required of capital budgeting projects that are about as risky as the firm.
C) Either of the above
D) None of the above
Invested Funds
Capital that has been placed into a project or company, with the expectation of generating income or profit.
- Comprehend the principle of capital cost and its influence on returns from investments and asset valuation.
- Understand the utilization of capital cost in making decisions related to capital budgeting.
Verified Answer
MS
Michael SchneiderJun 28, 2024
Final Answer :
C
Explanation :
The cost of capital can be either the rate a firm pays for the use of invested funds or the minimum return required of capital budgeting projects that are about as risky as the firm. Therefore, both choices A and B are correct, making option C the best choice. Option D is incorrect as it is not a valid answer.
Learning Objectives
- Comprehend the principle of capital cost and its influence on returns from investments and asset valuation.
- Understand the utilization of capital cost in making decisions related to capital budgeting.