A firm's cost of capital is simply the interest rate it must pay on its loans.

Name: A firm's cost of capital is simply the interest rate it must pay on its loans.
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A firm's cost of capital takes into account not just the interest rate on loans, but also other sources of financing such as equity and preferred stock. It is a weighted average of all of the costs of these sources of funding, reflecting the overall cost that the firm incurs to raise the capital it needs for its operations.

A Firm's Cost of Capital Is Simply the Interest Rate