[amp_mcq option1=”The dividend paid on the equity capital” option2=”The weighted average of the cost of various long-term and short-term sources of finance” option3=”The average rate of return it must earn on its investments to satisfy the various investors” option4=”The minimum rate of return it must earn on its investments to keep its investors satisfied” correct=”option2″]<\/p>\n
The correct answer is: B. The weighted average of the cost of various long-term and short-term sources of finance.<\/p>\n
The cost of capital is the rate of return a company must earn on its investments in order to satisfy its investors. It is calculated by taking the weighted average of the cost of each type of capital the company uses, such as debt, equity, and preferred stock. The cost of capital is an important concept in finance because it is used to determine the value of a company and to make investment decisions.<\/p>\n
Option A is incorrect because the dividend paid on equity capital is only one component of the cost of capital. The cost of capital also includes the cost of debt and preferred stock.<\/p>\n
Option C is incorrect because the average rate of return a company must earn on its investments to satisfy the various investors is not necessarily the same as the weighted average of the cost of various long-term and short-term sources of finance. The cost of capital is a weighted average, while the average rate of return is not.<\/p>\n
Option D is incorrect because the minimum rate of return a company must earn on its investments to keep its investors satisfied is not necessarily the same as the weighted average of the cost of various long-term and short-term sources of finance. The cost of capital is a weighted average, while the minimum rate of return is not.<\/p>\n","protected":false},"excerpt":{"rendered":"
[amp_mcq option1=”The dividend paid on the equity capital” option2=”The weighted average of the cost of various long-term and short-term sources of finance” option3=”The average rate of return it must earn on its investments to satisfy the various investors” option4=”The minimum rate of return it must earn on its investments to keep its investors satisfied” 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":[945],"tags":[],"class_list":["post-46129","post","type-post","status-publish","format-standard","hentry","category-financial-management","no-featured-image-padding"],"yoast_head":"\n