A firm's cost of capital represents all the following except.

Question

Quizplus · Accepted Answer

The cost of capital refers to the cost of a company's funds (both debt and equity), or, from an investor's point of view "the required rate of return on a portfolio company's existing securities". It is used to evaluate new projects of a company. It is not the cost of the long-term operating assets the firm acquires, which is more directly associated with capital expenditure decisions rather than the financing of those assets.

A Firm's Cost of Capital Represents All the Following Except