The cost of capital to the lender consists of the opportunity cost on the amount of equity invested in the business.

Question

Quizplus · Accepted Answer

The cost of capital to the lender consists of the interest rate they could earn on alternative investments of similar risk, not the opportunity cost on equity invested in the business. Equity investment considerations are more relevant to the owners or shareholders of a business.

The Cost of Capital to the Lender Consists of the Opportunity