Question

What are factors influencing the company's overall cost of capital?

Select all that apply:

Business or operational risk

Cost of debt

Sources of funding for financing a particular project

Sources of funding for the company overall

Cost of equity

Answer 1

Factors influencing the company's overall cost of capital

1. Business or operational risk: Business risk directly affect a company's cost of equity, hence it's overall cost of capital
2. Cost of debt & Cost of equity: Overall cost of capital comprises of cost of equity and cost of debt. Hence it directly affect overall cost of capital.
3. Sources of funding for financing a particular project: Cost of capital refers to cost of making a particular project. Cost of such funding depends on sources of funding hence directly affect cost of capital.
4. Sources of funding for the company overall: It also affect cost of capital