Which of the following statements about the corporate cost o

Which of the following statements about the corporate cost of capital is most correct?

Solution

Correct option is > E. The corporate cost-of-capital estimate is based on the cost of embedded (current) debt coupled with the cost of newly issued equity.

The cost of capital should be based on current cost of debt and it should be coupled with newly issue equity costing, this estimate gives most correct or close cost of capital.