Asked by Aydee Esparza on Jun 19, 2024
Verified
An increase in a firm's operating risk will have no impact on its cost of capital.
Operating Risk
The risk of loss arising from the day-to-day operations of a business.
Cost Of Capital
A measure of the return required by investors to compensate them for the risk of investing in a company.
- Comprehend how risk affects the components of capital cost and the total weighted average cost of capital (WACC).
Verified Answer
PS
princess shafferJun 22, 2024
Final Answer :
False
Explanation :
An increase in a firm's operating risk will increase its cost of capital. This is because investors will demand a higher return to compensate for the increased risk.
Learning Objectives
- Comprehend how risk affects the components of capital cost and the total weighted average cost of capital (WACC).
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