Which of the following is the preferred method in estimating a firm's cost of capital?

Question

Quizplus · Accepted Answer

The preferred method in estimating a firm's cost of capital is to calculate the weighted average cost of new capital to be utilized in financing a firm's projects. This method takes into account all of the sources of financing that a company uses, including debt and equity, and their respective costs. Option A only considers the marginal cost of a specific source of financing and may not reflect the company's overall cost of capital. Option C is not commonly used as it is difficult to estimate the beta of a company accurately. Option D is not correct as the weighted average cost of new capital is the preferred method.

Which of the Following Is the Preferred Method in Estimating