Which of the following causes a firm's cost of capital (WACC)to differ from an investor's required rate of return on the company's common stock?

Question

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The firm's cost of capital (WACC) includes the cost of all capital components, including equity, debt, and preferred stock, weighted by their respective proportions in the company's capital structure, and adjusted for any flotation costs incurred in raising new capital. The investor's required rate of return only reflects the return they demand on the common stock. Therefore, incurrence of flotation costs when new securities are issued will only affect the WACC and not the investor's required rate of return. The risk-free rate of interest and the market risk premium may differ for different investors and are elements that affect both the WACC and the investor's required rate of return equally.

Which of the Following Causes a Firm's Cost of Capital