Which of the following statements regarding cost of capital is not true?
A) It reflects the perceived level of risk for which investors in debt and equity securities expect to be compensated.
B) It is another term for "required rate of return."
C) It is typically defined as a weighted-average of all sources of capital for the company.
D) It is used to calculate the present value of anticipated after-tax cash flows for a project.
E) It is used when calculating the internal rate of return (IRR) of a proposed investment.

Question

Quizplus · Accepted Answer

The cost of capital is not used when calculating the internal rate of return (IRR) of a proposed investment. The IRR is the rate at which the net present value of the cash flows from an investment equals zero, and it is calculated independently of the cost of capital.

Which of the Following Statements Regarding Cost of Capital Is