Weighted average cost of debt, preferred stock and common equity is classified as_____________?
Correct answer: D. Cost of capital
- A. Cost of salvage
- B. Cost of interest
- C. Cost of taxation
- D. Cost of capital
Explanation
A firm's overall financing cost combines the costs of debt, preferred stock and common equity using their respective weights. This weighted total is the cost of capital.
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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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