Question

Can a company’s overall cost of capital be used in business with diversified business sector? Discuss.

Answer 1

Cost of capital : This is an opportunity cost of making a specific investment or cost of capital is an investment against we get the revenue. Company's Cost of capital is the overall cost of capital incurred in the company. This is an average cost and in the diversified business sector every sector have there seprate requirement and seprate working capital requirement.

so we cannot use the company's cost of capital  in business with diversified business sector.