Which of the following is correct regarding cost of capital ?

CS Executive · Financial and Strategic Management · PYQS · June 2022
Which of the following is correct regarding cost of capital ?
(A) When interest rates increases, cost of equity decreases, thereby decreasing cost of capital
(B) When tax rate increases, cost of debt decreases, thereby increasing cost of capital
(C) An increase in interest rate will affect the cost of debt and potentially the cost of capital
(D) None of the above

Answer & Explanation:

Correct Answer: Option (C)

Official answer key: (C).

Topics: Financial Management

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