If a company's weighted average cost of capital is less than the required return on equity, then the firm
A) is financed with more than 50% debt.
B) is perceived to be safe.
C) has debt in its capital structure.
D) must have preferred stock in its capital structure.

Question

Quizplus · Accepted Answer

If a company's weighted average cost of capital (WACC) is less than the required return on equity, it indicates that the firm has debt in its capital structure, as debt typically has a lower cost than equity, reducing the overall WACC.

If a Company's Weighted Average Cost of Capital Is Less