The rates of return, or costs, that a firm must pay to raise funds to invest in capital budgeting projects are determined by the:

Question

Quizplus · Accepted Answer

The rates of return or costs that a firm must pay to raise funds are determined by investors who purchase the firm's stocks and bonds in the financial markets. The firm's cost of capital is determined by the market's assessment of the risk associated with the firm's operations and the expected return on investment that investors require.

The Rates of Return, or Costs, That a Firm Must