Asked by Ashley Eggleston on May 27, 2024
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Which of the following best describes what the cost of capital should reflect?
A) The cost of capital should reflect the average cost of the various sources of short-term funds a firm uses to acquire assets.
B) The cost of capital should reflect the average cost of the various sources of long-term bonds a firm uses to acquire fixed assets.
C) The cost of capital should reflect the average cost of the various sources of long-term funds a firm uses to acquire assets.
D) The cost of capital should reflect the average cost of the various sources of long-term capital, as well as supplier capital, the firm uses to acquire fixed assets.
Cost of Capital
The rate of return a company must pay to its shareholders and debt holders, representing the cost of obtaining funds to finance its operations.
Long-Term Funds
Investments or sources of financing that are provided or required for a duration exceeding one year.
Acquisition of Assets
The process by which a company purchases or obtains assets, such as property, equipment, or other resources, to enhance its business operations.
- Comprehend the principle of capital cost and its significance in financial management.
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Learning Objectives
- Comprehend the principle of capital cost and its significance in financial management.
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