question archive Which of the two statements A and B is correct? NB: If you think the two statements are correct, you should answer C, if you think the two statements are not correct, you should answer D
Which of the two statements A and B is correct? NB: If you think the two statements are correct, you should answer C, if you think the two statements are not correct, you should answer D
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Which of the two statements A and B is correct? NB: If you think the two statements are correct, you should answer C, if you think the two statements are not correct, you should answer D. A - The cost of capital (COC) for a firm is the opportunity cost the firm must bear for raising the money necessary for the required investments. B - When considering an investment project, investors expect to be given as much return (on average) as the return they could get from investments of similar risk; this average return corresponds to the cost of capital which should be used to study this investment project. C - Both statements are correct. D - None of these two statements are correct.
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Option C is correct - both statements are correct
Statement 1 - The cost of capital is the required return by firm for making investment. It is the cost for the capital raised by the firm via equity or debt. Hence the statement is true.
Statement 2 - The statement is true. For e.g.While evaluating the capital budgeting decision the investor use required return on similar investment to figure the present value. It corresponds to cost of capital which investor required on its investment.
