The cost of capital is a static concept; it is not affected by economic and firm-specific factors such as business risk and financial risk.

Question

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The cost of capital is a dynamic concept that can be affected by economic and firm-specific factors such as business risk and financial risk. These factors can impact the required return on investment for equity investors and the cost of debt, which can in turn affect the overall cost of capital for a firm.

The Cost of Capital Is a Static Concept; It Is