[amp_mcq option1=”Specific cost” option2=”Composite cost” option3=”Implicit cost” option4=”Simple Average cost” correct=”option2″]<\/p>\n
The correct answer is: B. Composite cost<\/strong><\/p>\n The composite cost of capital is the weighted average of the costs of all the different sources of capital a company uses. It is calculated by multiplying the cost of each source of capital by its proportion of the total capital and then adding up the products.<\/p>\n The cost of capital is an important concept in finance because it is the rate of return that a company must earn on its investments in order to satisfy its investors. If a company’s return on investment is less than its cost of capital, then it is not generating enough profit to cover its costs and will eventually go out of business.<\/p>\n There are a number of different sources of capital that a company can use, including debt, equity, and retained earnings. The cost of each source of capital will vary depending on a number of factors, such as the riskiness of the investment, the maturity of the debt, and the tax treatment of the income.<\/p>\n The composite cost of capital is used in a number of financial calculations, such as the capital budgeting process and the valuation of a company. It is also used to set the hurdle rate for new investments.<\/p>\n The other options are incorrect because:<\/p>\n [amp_mcq option1=”Specific cost” option2=”Composite cost” option3=”Implicit cost” option4=”Simple Average cost” correct=”option2″]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[700],"tags":[],"class_list":["post-33689","post","type-post","status-publish","format-standard","hentry","category-business-finance","no-featured-image-padding"],"yoast_head":"\n\n