The cost of capital should reflect the average cost of the various sources of long-term funds a firm uses to support its assets.

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The cost of capital is the average cost of different sources of financing, including equity, debt, and preferred stock. The cost of capital reflects the returns that investors expect to receive based on the risk and return of the investment, and it is used to evaluate investment opportunities and make financial decisions.

The Cost of Capital Should Reflect the Average Cost of the Various