If a company's cost of capital is less than the required return on equity, then the firm:

Question

Quizplus · Accepted Answer

If a company's cost of capital is less than the required return on equity, it implies that the cost of debt is lower than the required return on equity. This typically implies that the company has debt in its capital structure, which is cheaper compared to equity financing. Therefore, the company can lower its overall cost of capital by using more debt in its capital structure.

If a Company's Cost of Capital Is Less Than the Required