Cost of capital varies with a company's level of risk.

Question

Quizplus · Accepted Answer

The cost of capital is influenced by a company's level of risk. As the risk associated with a company's investment projects increases, so does the cost of capital. This is because investors require a higher rate of return to compensate for the additional risk they are taking on. Conversely, if a company has a low-risk profile, its cost of capital will be lower than that of a high-risk company. Therefore, the statement is true.

Cost of Capital Varies with a Company's Level of Risk