Depending on the mixture of sources of capital,a company's cost of capital will vary.

Question

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The cost of capital is influenced by the combination of debt and equity financing sources utilized by the organization. The cost of equity is influenced by the firm's share price, perceived risk, and dividend payouts, while the cost of debt is influenced by the prevailing interest rates, creditworthiness of the company, and associated repayment terms. These prices are weighted averages that are used to derive the company's overall cost of capital.

Depending on the Mixture of Sources of Capital,a Company's Cost