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Firm's Cost of Capital is the average cost of: ?

<p><span>(a) All sources,</span></p> <p><span>(b) All borrowings, </span></p> <p><span>(c) Share capital, </span></p> <p><span>(d) Share Bonds &amp; Debentures.</span></p>

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Question added by VENKITARAMAN KRISHNA MOORTHY VRINDAVAN , Project Execution Manager & Accounts Manager , ALI INTERNATIONAL TRADING EST.
Date Posted: 2014/09/20
Ayman Esa Mustafa Farrag
by Ayman Esa Mustafa Farrag , مدير مالي , شركة الصفوف

A is the correct answer because 

The cost of funds used for financing a business. Cost of capital depends on the mode of financing used – it refers to the cost of equity if the business is financed solely through equity, or to the cost of debt if it is financed solely through debt. Many companies use a combination of debt and equity to finance their businesses, and for such companies, their overall cost of capital is derived from a weighted average of all capital sources, widely known as the weighted average cost of capital (WACC). Since the cost of capital represents a hurdle rate that a company must overcome before it can generate value, it is extensively used in the capital budgeting process to determine whether the company should proceed with a project.

Abed Hasan Abdullah  Othman
by Abed Hasan Abdullah Othman , general accountant , Trading company

(a) all resources  

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