For an all-equity firm,the cost of equity is equal to the overall cost of capital.

Question

Quizplus · Accepted Answer

When a firm uses only equity to finance its operations, its cost of equity becomes the overall cost of capital. This is because the cost of equity represents the return required by investors to compensate them for the risk associated with investing in the firm. Since the firm has no debt-based financing, the cost of debt is zero, and hence the cost of equity becomes the overall cost of capital.

For an All-Equity Firm,the Cost of Equity Is Equal to the Overall