Which of the following statements MOST accurately describes a company's weighted average cost of capital?
A) The interest rate charged to the company for long-term debt
B) The amount a company incurs for capital expenditures
C) The minimum rate of return required by its investors
D) The average of beginning assets and ending assets

Question

Quizplus · Accepted Answer

A company's weighted average cost of capital (WACC) is the minimum rate of return required by its investors, taking into account the relative proportions of each source of capital (debt and equity) used by the company. It represents the average cost of financing for the company, factoring in the cost of debt and the cost of equity.

Options A and B are incorrect because they refer to specific components of a company's financing or investment decisions, but do not capture the overall cost of financing. Option D is incorrect because it is unrelated to a company's financing costs.

Which of the Following Statements MOST Accurately Describes a Company's