The rate that management expects to pay on borrowed or equity funds is known as
A) the hurdle rate.
B) the cost of capital.
C) the cutoff rate.
D) all of these answer choices are correct.

Question

Quizplus · Accepted Answer

The cost of capital is the rate that management expects to pay on borrowed or equity funds. The other options, hurdle rate and cutoff rate, are similar terms that can also be used to refer to the cost of capital, but the most commonly used term in finance is the cost of capital. Therefore, only option B is the correct answer.

The Rate That Management Expects to Pay on Borrowed or Equity