A firm's cost of capital is not affected by the composition of the right-hand side of the firm's balance sheet,but rather is determined by the firm's mix of assets.

Question

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A firm's cost of capital is affected by the composition of the right-hand side of the firm's balance sheet, which includes the firm's mix of liabilities and equity. The cost of debt and cost of equity both contribute to a firm's overall cost of capital, which can vary depending on the proportion of debt and equity used to finance the firm's assets.

A Firm's Cost of Capital Is Not Affected by the Composition