Rate of return which is required to satisfy stockholders and debt holders is classified as__________?
Correct answer: B. Weighted average cost of capital
- A. Weighted average cost of interest
- B. Weighted average cost of capital
- C. Weighted average salvage value
- D. Mean cost of capital
Explanation
The return required by both lenders and shareholders is combined according to their financing weights. This blended required return is the weighted average cost of capital, or WACC.
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About Business Finance
Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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