The cost of capital of each source of financing is the after-tax cost of obtaining the financing using the historically based cost reflected by the existing financing on the firm's books.

Question

Quizplus · Accepted Answer

The statement is not entirely accurate. The cost of each source of financing should be determined based on the current market conditions, not just the historical cost reflected on the firm's books. Additionally, the after-tax cost should take into account any tax deductions or credits associated with the financing.

The Cost of Capital of Each Source of Financing Is