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

Question

Quizplus · Accepted Answer

This is because if the cost of capital is less than the required return on equity, it indicates that the company is using debt in its capital structure to bring down the overall cost of capital. The cost of debt is typically lower than the cost of equity, so incorporating debt into the capital structure allows the company to lower its overall cost of capital.

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