The only reason for the difference between the effective cost of capital and investors' returns is the tax effect of interest payments, which reduces the firm's cost of debt.

Question

Quizplus · Accepted Answer

The difference between the effective cost of capital and investors' returns may also be caused by factors such as market conditions, business risk, and management decisions. It is not solely due to the tax effect of interest payments.

The Only Reason for the Difference Between the Effective Cost