Question

The explicit cost of capital is _________________.

• A. The rate of return of cash flows of financing opportunity
• B. The rate of return of fund flows of financing opportunity
• C. The internal rate of return the firm pays to procure financing
• D. Both (a) and (c)

Answer 1

Answer: (D)

Both (a) and (c)

The explicit cost of any sources of capital may be defined as the discount rate that equates the present value of the cash inflows that are incremental to the taking of the financing opportunity with the present value of its incremental cash outflows and also help for the internal sourcing. its related with the The rate of return of fund flows of financing opportunity and The internal rate of return the firm pays to procure financing