Question

The cost of capital is the average cost an organization pays to obtain the resource (i.e., borrowed funds, as well as on funds provided by investors in the company's stock) necessary to make investments.True/False

Answer 1

True

Step-by-step explanation:

The cost of capital or Weighted average cost of capital WACC determines firms cost of capital. It includes all sources of finance which are included in firms capital structure. The sources of finance can be borrowed funds, shareholders etc

The WACC is calculated with given formula:

WACC = E/V Re + D/V * Rd (1 - T)