If a firm sells assets, generating cash flows, the cost of these funds is ____.

Question

Quizplus · Accepted Answer

When a firm sells assets and generates cash flows, the cost of these funds would be the firm's weighted cost of capital. This is because the cost of capital represents the cost of all funds that the firm uses, whether it is from equity, debt or assets. Therefore, the firm's weighted cost of capital would be the appropriate measure to evaluate the cost of the funds generated by the sale of assets. The cost of equity and cash flows are not relevant in this scenario, and the cost of funds generated from asset sales is not zero as it involves the sale of valuable assets.

If a Firm Sells Assets, Generating Cash Flows, the Cost