In order to recognize the interrelationship between financing and investments, a firm should use ________ when evaluating an investment.
A) the least costly source of financing
B) the most costly source of financing
C) the weighted average cost of all financing sources
D) the current opportunity cost

Question

Quizplus · Accepted Answer

The weighted average cost of all financing sources, also known as the WACC, takes into account the cost of each source of financing and the proportion of each source used. By using the WACC to evaluate an investment, a firm can determine if the return on the investment is greater than the cost of the financing used to fund it. This helps ensure that the investment is financially feasible and beneficial for the firm.

In Order to Recognize the Interrelationship Between Financing and Investments