The cost of capital is always the marginal cost of a euro of:

Question

Quizplus · Accepted Answer

The cost of capital represents the cost of obtaining additional funds for a project, also known as incremental financing. The cost of equity or debt financing may be considered when obtaining these funds, but the cost of capital should take into account all sources of financing, not just one or the other. Stockholders' equity may be a component of the cost of capital, but it is not the only factor. Therefore, the best choice is C, incremental financing.

The Cost of Capital Is Always the Marginal Cost of a Euro