Which of the following is the preferred method in estimating a firm's cost of capital?

Question

Quizplus · Accepted Answer

The preferred method of estimating a firm's cost of capital is to calculate the weighted average cost of new capital to be utilized in financing a firm's projects. This method takes into account all sources of financing and their respective costs, providing a more comprehensive and accurate measure of the firm's overall cost of capital. Options A and C only consider specific sources of financing or rely on the CAPM model, which may not capture the entire cost of capital. Option D uses historical costs, which may not reflect current market conditions and may not be relevant to future projects.

Which of the Following Is the Preferred Method in Estimating