The cost of capital is the simple average rate of return that a company must pay to its long-term creditors and the shareholders.

Question

Quizplus · Accepted Answer

The cost of capital is not a simple average rate of return, but rather the overall cost of financing a company, taking into account the cost of debt and the cost of equity. It is the minimum rate of return that a company must earn on its investments in order to satisfy its investors and creditors.

The Cost of Capital Is the Simple Average Rate of Return