The cost of capital can be thought of as the rate of return required by the market suppliers of capital in order to attract their funds to the firm.

Question

Quizplus · Accepted Answer

This statement is true. The cost of capital is the rate of return that a company must earn on its investments in order to satisfy the expectations of its investors or lenders. This rate of return is set by the market based on factors such as interest rates, riskiness of the investment, and potential returns from alternative investments. Companies must consider the cost of capital when making investment decisions, as they need to generate returns that are higher than this cost in order to create value for their shareholders.

The Cost of Capital Can Be Thought of as the Rate