Question

The firm’s overall cost of capital that is a blend of the costs of the different sources of capital is known as the firm’s:

	A.	cost of equity infusion.
	B.	cost of debt.
	C.	weighted average cost of capital.
	D.	cost of preferred stock.

Answer 1

Option a, cost of equity infusion is the return paid by a firm to its equity investors.

Option a, cost of debt refers to the cost of debt raised by a company for its capital needs.

Option c, weighted average cost of capital is the weighted average of a firm’s components of the cost of capital such as debt and equity.

Option d, cost of preferred stock is the price paid by a firm for the costing of issuing preferred stock. It is the return expected by the holders of preferred stock.

Hence, the answer is option c.