Question

The measurement of the overall cost of capital involves ___________________.

• A. The choice of appropriate weights
• B. Computation of individual source of finance
• C. The choice of appropriate technology
• D. The choice of appropriate inflows

Answer 1

The correct option is A The choice of appropriate weights

The Weighted Average Cost of Capital serves as the discount rate for calculating the Net Present Value (NPV) of a business. It is also used to evaluate investment opportunities, as it is considered to represent the firm's opportunity cost. Thus, it is used as a hurdle rate by companies