Which of the following statements regarding the cost of capital is/are correct? I. The weighted cost of capital is the discount rate used when computing the net present value.
II) The after-tax cost of capital is weighted by the proportions of the capital components in the firm's long-range target capital structure.

Question

Quizplus · Accepted Answer

I is correct as the weighted cost of capital is commonly used as the discount rate when computing the NPV of a project. 
II is also correct as the after-tax cost of capital for each capital component is weighted by the proportions they make up in the firm's long-range capital structure. Therefore, both statements are correct.

Which of the Following Statements Regarding the Cost of Capital