Asked by Shanda Harrison on Jun 25, 2024
Verified
The cost of capital,expressed in dollars,reflects the level of earnings investors demand from the company as compensation for the risks of investment.
Cost Of Capital
The return rate that a company must earn on its investment projects to maintain its market value and attract funds.
Investment Risks
The possibility of losing some or all the original investment, which can arise from various sources including market volatility, inflation, and default.
- Comprehend the link between capital cost, earnings, and the assessment of a firm's value.
Verified Answer
MC
Monaca CollinsJun 30, 2024
Final Answer :
True
Explanation :
The cost of capital is the amount of return that a company must earn on its investments in order to satisfy its investors' expectations. This return is often expressed in dollar terms or as a percentage, and it reflects the level of earnings investors demand as compensation for the risks of investing in the company. Therefore, the statement is true.
Learning Objectives
- Comprehend the link between capital cost, earnings, and the assessment of a firm's value.
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