The cost of capital is

Question

Quizplus · Accepted Answer

The cost of capital is the opportunity cost of using funds to invest in new projects, as it represents the return a company could have earned by investing those funds elsewhere. It is also the rate of return the firm must earn on its investments to satisfy the required rate of return of the firm's investors, as investors expect their investments to earn a certain rate of return. Finally, the cost of capital is the required rate of return for new capital investments which have typical or average risk, as this is the minimum return required to compensate investors for taking on risk. Therefore, all three statements are true, making the correct answer choice D.

The Cost of Capital Is