[amp_mcq option1=”Weighted Average cost of all debts” option2=”Rate of Return expected by Equity Shareholders” option3=”Average IRR of the Projects of the firm” option4=”Minimum Rate of Return that the firm should earn” correct=”option1″]<\/p>\n
The correct answer is: A. Weighted Average cost of all debts<\/strong><\/p>\n Cost of capital is the rate of return a company must earn on its investments in order to satisfy its creditors and owners. It is a weighted average of the costs of debt and equity, where the weights are the proportions of debt and equity in the company’s capital structure.<\/p>\n The cost of debt is the interest rate the company pays on its loans. The cost of equity is the rate of return investors expect to earn on their investment in the company. The weighted average cost of capital is used to calculate the return on investment (ROI) for a project or investment.<\/p>\n Option B is incorrect because the rate of return expected by equity shareholders is only one component of the cost of capital. The cost of capital also includes the cost of debt.<\/p>\n Option C is incorrect because the average IRR of the projects of the firm is not a reliable measure of the cost of capital. The IRR is a measure of the profitability of a project, but it does not take into account the risk of the project.<\/p>\n Option D is incorrect because the minimum rate of return that the firm should earn is not a reliable measure of the cost of capital. The minimum rate of return is a target that the firm may aim for, but it does not take into account the risk of the firm’s investments.<\/p>\n","protected":false},"excerpt":{"rendered":" [amp_mcq option1=”Weighted Average cost of all debts” option2=”Rate of Return expected by Equity Shareholders” option3=”Average IRR of the Projects of the firm” option4=”Minimum Rate of Return that the firm should earn” correct=”option1″]<\/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-58511","post","type-post","status-publish","format-standard","hentry","category-financial-management","no-featured-image-padding"],"yoast_head":"\n