The cost of capital is the rate of return a firm must meet or exceed on investments to increase the firm's value.

Question

Quizplus · Accepted Answer

This statement is true. The cost of capital is the minimum return that a company must achieve on its investments. It is calculated as the weighted average of the cost of debt and the cost of equity. Any investment that does not meet or exceed the company's cost of capital is considered a loss to the company, as it does not add any value to the company.

The Cost of Capital Is the Rate of Return a Firm