Which of the following statements regarding cost of capital Is Incorrect ? The r

Question

Which of the following statements regarding cost of capital Is Incorrect ? The return that lenders (bondholders) require on their loaned funds to the firm Is the firm of debt The beta coefficient of the fern's stock Is its cool of equity A firm's capital structure Wight are the proportions of its value of its assets financed via debt , common stock, and preferred stock. The overall cost of capital that covers the firm's costs of equity. preferred stock, and after tii. debt Is called the weighted average cost of capital

Explanation / Answer

Option B, The beta co-efficient is the firm's cost of equity is incorrect. Beta co-efficient is the measure of the undiversifiable risk of the firm. Beta is a component of cost of equity(using CAPM) and not a cost of equity.

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