Asked by
Apurva Muddappa
on Dec 01, 2024
Verified
The only reason for the difference between the effective cost of capital and investors' returns is the tax effect of interest payments, which reduces the firm's cost of debt.
Effective Cost Of Capital
The actual cost of a company's funding after adjusting for various factors, including tax benefits, associated with different sources of capital.
- Perceive the connection between what investors expect in returns and the constituents of the firm's capital cost.
Verified Answer
CR
Learning Objectives
- Perceive the connection between what investors expect in returns and the constituents of the firm's capital cost.