A firm's overall cost of capital is

Question

Quizplus · Accepted Answer

The firm's overall cost of capital is a weighted average of the costs of capital for the collection of individual projects that the firm is working on. This takes into account the proportions of each project in the overall capital structure of the firm. Therefore, option B is the correct answer. Option A is not true as the cost of capital should include both the cost of debt and the cost of equity. Option C is incorrect as the cost of capital should be measured based on the overall projects that the firm is working on, not just the riskiest projects. Option D is not correct as option B is the correct answer.

A Firm's Overall Cost of Capital Is